Why only listen to True Fiduciaries
When seeking financial advice, it’s important to understand the differences between different types of financial advisors. In particular, it’s crucial to understand the distinctions between fiduciary, non-fiduciary, and dually registered advisors. In this post, I will explain the key differences between these types of advisors.
True Fiduciary Advisors
- A fiduciary advisor is someone who is legally and ethically bound to act in their client’s best interests. This means that they must prioritize their client’s needs above their own, and they are obligated to disclose any conflicts of interest. Fiduciary advisors are required to act in a transparent and trustworthy manner and offer advice that is in the best interest of their clients.
Non-Fiduciary Advisors
- Non-fiduciary advisors, on the other hand, are not legally obligated to act in their client’s best interests. They are only required to make recommendations that are suitable for their clients’ needs, but not necessarily the best option. Non-fiduciary advisors may receive commissions or other incentives for recommending certain financial products, which may create conflicts of interest.
Dually Registered Advisors
- Dually registered advisors are financial professionals who operate under both fiduciary and non-fiduciary standards. They may offer both fee-based and commission-based services, and may be held to different standards depending on the services they are providing. While some dually registered advisors may act as fiduciaries for some services, they may operate under a non-fiduciary standard for others, which can create confusion for clients.
| True Fiduciary | Non-Fiduciary | Dually Registered | |
| Legal standard | Held to fiduciary duty | Held to suitability | Can operate under both |
| Primary obligation | Act in client’s best interest | Sell suitable products | Can prioritize commission |
| Compensation structure | Fee-based, transparent | Commission-based, opaque | Can operate under both |
| Conflicts of interest disclosure | Required by law | Optional | Required by law |
| Investment recommendations | Based on client’s goals and risk tolerance | May have undisclosed biases | Can prioritize commission |
| Disclosure of fees and expenses | Required by law | May be opaque or misleading | Required by law |
| Regulatory oversight | SEC or state regulators | SEC or state regulators | SEC or state regulators |
In summary, when seeking financial advice, it’s crucial to work with a true fiduciary advisor who is legally bound to act in your best interests. Non-fiduciary advisors may not offer the same level of transparency and trustworthiness, and dually registered advisors can create confusion for clients. As a pure fiduciary financial advisor, I am committed to providing transparent and trustworthy advice that is in the best interests of my clients.
