Fiduciary
A fiduciary is a person or organisation legally obligated to act in your best financial interest, not their own. Fee-only financial advisors and Registered Investment Advisors (RIAs) are fiduciaries. Many commission-based brokers are held only to a 'suitability' standard — a meaningfully lower bar.
The fiduciary duty requires advisors to: act in the client's best interest, avoid conflicts of interest (or fully disclose them), and provide full transparency on fees. The SEC's Regulation Best Interest (Reg BI, 2020) raised standards for brokers but falls short of a full fiduciary requirement.
Fee-only advisors (who charge flat fees, hourly rates, or a percentage of assets under management) have fewer conflicts than commission-based advisors (who earn money when you buy a product). The NAPFA (National Association of Personal Financial Advisors) maintains a directory of fee-only fiduciaries.
Always ask: "Are you a fiduciary for all advice you give me, at all times?" A yes means their legal obligation is to you. A "sometimes" or "it depends" means they may switch hats — acting as a fiduciary for investment advice but not for insurance or annuity sales.
Related terms
- Annuity
- An annuity is a financial product that converts a lump sum into a stream of periodic payments, either for a fixed period or for life. Annuities are issued by insurance companies and provide longevity protection — you cannot outlive the payments. They are commonly used to guarantee retirement income.
- Financial Independence (FI)
- Financial independence means having enough invested assets to cover your living expenses indefinitely without working. It is the point where your investment returns equal or exceed your annual spending.
- Savings Rate
- Your savings rate is the percentage of your income you save and invest rather than spend. It is the single most powerful lever for reaching financial independence — more important than investment returns for most people.