When you hire a financial advisor, you might assume they are going to act in your best interest — but what you think is an unspoken rule may very well not be.
In order to feel safe making that assumption, you’d need to confirm your financial advisor is a fiduciary — in other words, an individual or organization that has a legal duty to act in the best financial interests of someone else. Not all financial advisors or financial service providers are.
Understanding fiduciary duty
Fiduciaries have a bond of trust with their clients, and generally must avoid or disclose conflicts of interest. Fiduciary relationships are not governed by one specific type of law — instead, fiduciary duties depend on the profession and any regulations surrounding the role. For example, board members may have certain fiduciary duties to the companies that they advise. Trustees owe fiduciary duties to their beneficiaries. And retirement plan administrators typically have a fiduciary duty to the retirement plan, which means acting in the interest of the plan participants.
A fiduciary duty doesn't guarantee any sort of investment performance — it just means the fiduciary will prioritize your interests above their own.
Why not all financial advisors are fiduciaries
“Financial advisor" is a catch-all term that describes a wide variety of financial service providers, including investment advisors and managers, broker-dealers and financial planners. These financial service providers can all help you make investment decisions, but they are not all fiduciaries.
- An investment advisor has a legal duty to act in the client’s best interest at all times — they are fiduciaries and are regulated under the Investment Advisers Act of 1940. Investment advisors typically provide ongoing investment advice and portfolio management, though some may offer financial planning alongside that. As a fiduciary, they must eliminate, disclose or mitigate any conflicts of interest out of a duty of care to their clients.
- A broker-dealer buys and sells investments on behalf of a client and may offer advice related to those transactions. Under the SEC's Regulation Best Interest (Reg BI), broker-dealers must act in the client's best interest at the time a recommendation is made. That's a higher bar than a traditional suitability standard, but a few notches below the full fiduciary standard that investment advisors must meet. A broker-dealer’s loyalty and duty to the client applies primarily at the point of recommendation of a product, and while they must disclose conflicts, they do not need to avoid them.
- A financial planner helps clients create a broad financial strategy that may cover topics like budgeting, retirement, insurance, taxes, saving for various goals, estate planning and investment management. Whether a financial planner is a fiduciary or is held to any other standard depends on their credentials and business model.
» Looking for an advisor? Check out our list of the best financial advisors
Fiduciary duty vs. suitability standard
Another standard you might hear of in the financial advice industry is the suitability standard. The suitability standard sets a lower bar than a fiduciary duty.
The suitability standard is set by the Financial Industry Regulatory Authority (FINRA). It says a broker-dealer must have a reasonable belief that an investment is suitable for the customer, and requires that a broker have an understanding of the customer they are working with and the products they are recommending. This means the broker-dealer must do "reasonable due diligence” to develop an understanding of the risks and rewards of a strategy or investment.
It is worth noting that the SEC's Regulation Best Interest raised the standard for broker-dealers above FINRA's suitability rule. As mentioned above, under Regulation BI, broker-dealers have to act in the client's best interest when making a recommendation.
How do I know if I'm working with a financial advisor who is a fiduciary?
As noted above, there are many different types of financial service providers, so it’s especially important to vet a prospective financial advisor, investment advisor or broker-dealer before committing to one. First, ask if they're a fiduciary and verify their regulatory and professional status. Check if they are registered with the Securities and Exchange Commission (SEC) as an investment advisor or use FINRA’s BrokerCheck database to check their broker-dealer status.
You can also read the advisor’s Form ADV on the SEC’s Investment Advisor Public Disclosure page. The form discloses useful information about the firm, its business operations and any misconduct.
Another option is to look for a certified financial planner (CFP) designation. CFPs must fulfill significant financial education and experience requirements. And they're held to the CFP code of ethics, which includes acting as fiduciary. You can verify a CFP through the CFP Board’s website.
» Do your due diligence: 10 questions to ask a financial advisor
Is a robo-advisor a fiduciary?
Robo-advisors registered as investment advisors with the Securities and Exchange Commission have a fiduciary duty to their clients.
Robo-advisors use computer algorithms to build and manage an investment portfolio for you, taking into account certain personal factors, such as risk tolerance. Often, a robo-advisor costs less than a human one, and most focus only on portfolio management rather than providing comprehensive financial planning and investment advice.
» Sound like a good fit? Here's our analysis of the best robo-advisors
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- 1.Consumer Financial Protection Bureau. What Is a Fiduciary?. Accessed Mar 30, 2026.
- 2.FINRA.org. Suitability. Accessed Mar 30, 2026.
