What is a Fiduciary?

Fiduciary is a legally defined term. Fiduciaries are expected to exercise a duty of care and a duty of loyalty to clients, and as a result, are “held to the highest standard of conduct.” Fiduciaries have a bond of trust with another person (called the beneficiary or principal) and have a legal obligation to act for the beneficiary’s benefit – not their own. 

Fiduciary vs. Financial Advisor

Until relatively recently, the term “financial advisor” was used to describe various positions across the financial industry. Recent regulation from the U.S. Securities and Exchange Commission (SEC), called Regulation Best Interest (Reg BI), has limited who can use the title. Any advisor registered with the SEC is legally required to abide by fiduciary duty, and as a result, must put clients’ interests ahead of their own.

Potential Benefits of a Fiduciary Financial Advisor

A 2022 Northwestern Mutual study found that U.S. adults who work with a financial advisor “feel like they’re on more solid ground across the board" compared to those who don’t.¹

Working with an advisor who abides by fiduciary duty gives you the assurance of knowing they’re legally obligated to put your interests first. While a fiduciary can still have conflicts of interest, knowing that they have a duty of trust and loyalty with you, the consumer, can give you some peace of mind. That’s why most experts recommend asking an advisor whether they abide by fiduciary duty when you first meet with them. You can also use a service like SmartAdvisor, which matches would-be clients with fiduciary financial advisors. 

Assuming 5% annualized growth of $500k portfolio vs 8% annualized growth of advisor managed portfolio over 25 years.

The hypothetical study discussed above assumes a 5% net return and a 3% net annual value add for professional financial advice to performance based on the Vanguard Whitepaper “Putting a Value on your Value, Quantifying Vanguard Advisor's Alpha”.³ Please carefully review the methodologies employed in the Vanguard Whitepaper. To receive a copy of the whitepaper, please contact compliance@smartasset.com. The value of professional investment advice is only an illustrative estimate and varies with each unique client's individual circumstances and portfolio composition. Carefully consider your investment objectives, risk factors, and perform your own due diligence before choosing an investment adviser.

Fiduciary Fees

Many fiduciary advisors charge on a fee-only basis, which means they earn money exclusively through the fees that their clients pay. The fees you’ll pay for investment management services are often calculated as a percentage of assets under management (AUM) and are on average between 0.59 - 1.18%. A 2021 AdvisoryHQ study found that the average AUM fee for a $50,000 account was about 1.18% or $590.²

The fees financial advisors charge are often less than most people think, and the insights they add can potentially often surpass an advisor's cost. 

Hiring an advisor could increase your returns by 2x

How to Find a Fiduciary Financial Advisor

Knowing how to find a reputable vetted fiduciary advisor is, for many, the most confusing task of all.

Our free matching tool helps Americans get matched with up to three fiduciary financial advisors near you or virtual so that they can compare and decide which is right for them. 

Click Your State to Get Matched With Financial Advisors Who Serve Your Area

After you choose your state and answer a few questions, you can compare up to three advisors that serve your area and decide which to work with. 

Select Your State to Get Matched With Financial Advisors Who Serve Your Area 

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