When you begin your search for a financial advisor, the word fiduciary almost always comes up. But what does it actually mean?

A fiduciary is someone who is legally and ethically required to act in your best interest at all times. That goes beyond simply recommending what is “suitable.” A fiduciary is expected to recommend what is best for you, even if it means earning less themselves.

Although fiduciary responsibilities vary depending on the role, several core principles generally apply:

• Acting in the client’s or beneficiary’s best interest
• Avoiding or disclosing conflicts of interest
• Managing assets or responsibilities prudently
• Providing transparent and honest communication
• Following legal and ethical obligations

Are All Financial Advisors Fiduciaries?

So, is every financial advisor automatically a fiduciary? Short answer: no.

One term you’ll often see alongside fiduciary is fee-only. A fee-only financial advisor is paid directly by you, rather than by insurance companies or third-party investment firms. Because they don’t earn commissions on products, their advice is generally less influenced by sales incentives or outside compensation.

However, not all advisors operate this way, so it’s important to understand how a potential advisor gets paid. Some advisors earn commissions for recommending certain investments or insurance products. Others may act as fiduciaries only in specific situations, while using the term more loosely in their marketing. To the average investor, these distinctions aren’t always obvious.

Common Types of Fiduciaries

Financial advisors are only one example of fiduciaries. Though these roles can vary widely in responsibility and scope, they all involve important legal and ethical obligations tied to managing another person’s finances, assets, estate, or personal affairs.

Other common kinds of fiduciaries include:

• Trustees: Trustees are responsible for protecting and managing assets held in a trust for beneficiaries according to the instructions of the trust document.

   

• Executors: Executors are appointed to carry out the terms of a will and manage the administration of an estate upon the passing of an individual.

• Agents under a Power of Attorney (POA): Agents under a POA are given a range of authority to legally act on behalf of an individual, from broad financial matters to medical decisions.

• Conservators: Conservators are legally designated to manage financial or personal affairs for someone who is no longer able to do so for themselves.

Although these fiduciary roles differ in scope and responsibility, they all share a common obligation: to act in the best interests of those they serve.

Frequently Asked Questions

When searching for a fiduciary, it’s important to understand the basics before making important financial decisions. Below are answers to several common questions surrounding fiduciaries.

• What is a fiduciary account? 

  A fiduciary account is a financial account managed by a fiduciary on behalf of an individual. Examples include trust accounts, estate accounts, conservatorship accounts, and certain retirement or investment accounts.

• What is a fiduciary bond?

  A fiduciary bond is a type of insurance that protects individuals in the case of financial harm caused by a fiduciary’s failing to fulfill their responsibilities.

• What is a fiduciary deed?
  A fiduciary deed is a legal document used when a fiduciary transfers property on behalf of the individual or party they serve.

• Are Certified Financial Planners (CFPs) fiduciaries?
  Yes, all CFPs are held to fiduciary standards; however, you should still ask how an advisor is compensated and whether they act as a fiduciary at all times.

• What constitutes a breach of fiduciary duty?
  A breach of fiduciary duty occurs when a fiduciary fails to act in the best interests of the person or entity they are responsible for serving. Examples can include self-dealing, conflicts of interest, negligence, or misuse of assets.

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  Frequently Asked Questions

  You deserve a financial advisor who places your interest at the forefront. As fee-only fiduciaries, the Global View team is committed to acting as your advocate and always putting your best interest first.

  Let’s secure your financial future. Contact Global View today.