Fiduciary Standard

fiduciary-principle-tableThe difference between a stockbroker and a registered investment advisor is often discussed but not always understood. What kinds of services are provided? What opportunities do they provide in serving clients? What are the responsibilities of each? Here we provide some perspective on the differences between working with a broker and working with a fiduciary advisor. The registered investment adviser RIA model imposes a strong “fiduciary standard” on an advisor. The fiduciary standard is a legal requirement that the adviser act in the best interest of the client. In contrast, the broker-dealer model, holds brokers to a less strict and less specific “suitability standard,” in which recommended investments must be merely suitable for the client.

When you work with a registered investment advisor, that individual has a fiduciary responsibility to you and is held to legal standards under the Investment Adviser Act of 1940. As a fiduciary, an advisor is legally required to:

  • Put the client’s interests before advisor’s
  • Act with prudence
  • Not mislead clients
  • Avoid conflicts of interest
  • Fully disclose any unavoidable conflicts
    Source: Committee for the Fiduciary Standard

Fiduciary: A Higher Standard

A fiduciary is someone who must legally put your interests first, even before his or her own interests. Fiduciary professionals must also tell you about their qualifications and services as well as how they are paid.

As shown in the table to the right, your most trusted professionals are held to a fiduciary standard. Shouldn’t your financial advisor be held to the same standard?

A Fiduciary financial advisor who is advising you about investments must recommend investments that are best for you, He/she must reveal any potential conflicts of interest and any disciplinary actions taken against them. Legally, a registered investment advisor has a fiduciary responsibility to you; a broker does not.

Fiduciary Advisors Deliver Transparency

The importance of fiduciary responsibility has come into the spotlight recently. With Ponzi schemes, corporate scandals and misleading sales practices dominating the news, knowing where to place your trust can be difficult.
Fiduciary advisors hold themselves to one of the highest standards of trust in the industry. This trust is backed by a number of measures designed to deliver transparency and safeguard your investments:

Third-Party Custodian

  • Your assets are held at an independent qualified custodian
  • Trade confirmations are generated and mailed directly from the custodian


  • Your accounts held at a qualified custodian are covered under SIPC, a government insurance plan covering up to $500,000 per customer*
  • Many custodians have additional coverage against fraud

Multiple Regulators

  • The Securities and Exchange Commission (SEC) oversees your advisor and investment vehicles like mutual funds and exchange traded funds
  • The Financial Industry Regulatory Authority (FINRA) oversees custodian and trading activities

The Fiduciary Experience

While most brokerage firms are focused on commissions and products, fiduciary advisors are free to focus on solutions that help assure that your needs are objectively met and intentionally placed first. The fiduciary experience is based on an advisor’s commitment to a sound and prudent investment process guided by fiduciary standards. Within this
framework, the role of your advisor is to first look at a goal-focused picture of your life, and perhaps the life of your family, and realize the effect certain investment strategies and decisions may have now and into the future.

Fiduciary Matters

Your advisory firm is committed to earning and maintaining client trust through expert advice and solutions tailored to your unique needs. After all, the core of a fiduciary’s values is the commitment to serve the client’s interests
first and foremost.


Asset Allocation
Investment Review Selection
Portfolio Management
Risk Analysis Management
Tax Impact Analysis
Asset Transition Analysis

Copyright © 2019. HFG Wealth Management, LLC. Investment advisory services offered through HFG Wealth Management, LLC – An independent Registered Investment Advisory firm registered with the SEC. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Therefore, any information presented here should only be relied upon when coordinated with individual professional advice. [ more disclosures ]