Fiduciary vs. Financial Advisor

A fiduciary is an individual or entity who has a legal obligation to act in the interest of another party. A financial advisor is a finance professional who provides a broad range of money management services to clients. Financial advisors can be fiduciary or nonfiduciary.

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  • Written By
    Marguerita M. Cheng, CFP®, CRPC®, RICP®

    Marguerita M. Cheng, CFP®, CRPC®, RICP®

    Expert Contributor

    Marguerita M. Cheng, CFP®, CRPC®, RICP®, is the chief executive officer at Blue Ocean Global Wealth. As a CFP Board of Standards Ambassador, Marguerita educates the public, policymakers and media about the benefits of competent and ethical financial planning. She is a past spokesperson for the AARP Financial Freedom campaign.

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    Savannah Hanson
    Savannah Hanson, financial editor for

    Savannah Hanson

    Senior Financial Editor

    Savannah Hanson is an accomplished writer, editor and content marketer. She joined as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Financially Reviewed By
    Stephen Kates, CFP®
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    Stephen Kates, CFP®

    Expert Contributor

    Stephen Kates is a Certified Financial Planner™ and personal finance expert specializing in financial planning and education. Stephen has expertise in wealth management, personal finance, investing and retirement planning.

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  • Updated: May 19, 2023
  • 5 min read time
  • This page features 3 Cited Research Articles
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APA Cheng, M. M. (2023, May 19). Fiduciary vs. Financial Advisor. Retrieved June 8, 2023, from

MLA Cheng, Marguerita M. "Fiduciary vs. Financial Advisor.", 19 May 2023,

Chicago Cheng, Marguerita M. "Fiduciary vs. Financial Advisor." Last modified May 19, 2023.

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Key Takeaways

  • Fiduciaries have a relationship of trust with another party in which they are legally obligated to always act in the other party’s best interest. 
  • Financial advisors can be in a fiduciary or nonfiduciary relationship with their clients. Most fiduciary financial advisors are CFAs, CFP®, registered investment advisors and members of NAPFA and ACP. 
  • While many clients prefer fiduciaries, some are indifferent, and others will choose nonfiduciary advisors that offer lower fees as compensation for the commissions they will earn. 

The various terminologies that describe financial professionals are often confusing for those looking for help with their personal finances. For example, it can be difficult to differentiate between a financial advisor and a financial planner or a robo-advisor and a financial advisor if you are unfamiliar with their services.

Knowing whether you are working with a fiduciary or a financial advisor will help shape your expectations and avoid confusion through the process. If you expect a financial advisor to act like a fiduciary when they are not, then you may be disappointed or frustrated with the outcome.

To ensure you are getting the value you desire and are maintaining positive relationships with your financial experts, understand the distinctions between a fiduciary and a financial advisor.

Comparing Fiduciaries and Financial Advisors

Not all financial advisors are fiduciaries. To be a genuine fiduciary, one must be legally obligated to act in good faith and in the interest of the other party – in other words, a relationship of trust and loyalty must subsist. Consequently, any potential conflict of interest must be disclosed before the relationship begins. 

Trustees, attorneys, board members and corporate officers are some professionals who are legally obligated to act as fiduciaries on behalf of others. 

Other financial experts with legal duty to act in their clients’ best interest include CFP® professionals, registered investment advisors, CFA charter holders and advisors registered with the National Association of Personal Finance Advisers (NAPFA) and Alliance of Comprehensive Advisors (ACA). 

Financial professionals that are not fiduciaries include broker dealers, who are only mandated by the Financial Regulatory Authority (FINRA) to ensure the advice they give to clients are suitable for their goals. However, suitability is not the same thing as a legal fiduciary obligation.

To avoid any confusion, we will use “financial advisor” as a generic term that includes nonfiduciary and fiduciary advisors. 

Responsibilities and Legal Obligations

Fiduciary and nonfiduciary financial advisors often have the same general responsibilities — to help clients buy or sell securities, create financial plans, create and execute investment plans and develop estate plans. 

However, a fiduciary is under a legal obligation to act in the client’s best interest and disclose any conflict of interest beforehand. 

A nonfiduciary financial advisor, on the other hand, is not under the same obligation. As mentioned, some of them, such as broker dealers, are only under an obligation of suitability. 

Education and Training

Most of the financial advisors who are fiduciaries are CFP® professionals and CFA charter holders.

The Code of Ethics for CFP® professionals includes the following statements:

  • Act in the client’s best interests.
  • Avoid or disclose and manage conflicts of interest.

Similarly, the Code of Ethics guiding CFA charter holders states a rule to place the integrity of the investment profession and the interests of clients above their own personal interests.


Registered investment advisors are financial advisors who are registered under the Securities and Exchange Commission or a state securities regulation agency. 

These professionals are required, under the Investment Advisers Act of 1940, to act in a fiduciary capacity. 

In the words of the act, the SEC may proclaim rules with a goal to ensure that registered investment advisors “act in the best interest of the customer without regard to the financial or other interest of the broker, dealer or investment adviser providing the advice.”


Most fiduciary advisors will advertise themselves as fee-only advisors. That is, they don’t earn commissions from the products they recommend to clients. This ensures that they are recommending the products that will be in clients’ best interest rather than those that will make themselves money.

On the other hand, nonfiduciary financial advisors are often forthright about the fact that they earn commissions from the products they recommend. 


Financial advisors often offer the same broad range of services, such as financial planning, wealth management, investment advisory and stock brokerage. What differentiates them is whether they have a legal obligation to act in the best interest of the customer rather than their own. 

One of the most important questions to ask when interviewing a potential advisor is ‘How are you and your firm compensated?’ There are many different types of advisory models and finding the right one for your situation and goals will allow you to engage and trust in the relationship more fully.

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Stephen Kates, CFP®Expert Contributor

Are All Financial Advisors Fiduciaries?

Not all financial advisors are fiduciaries. However, because many clients prefer to work with fiduciaries, some nonfiduciary advisors aren’t so candid about their status. 

Therefore, it’s the responsibility of the client to confirm whether a financial advisor is a fiduciary. This can be as simple as posing the question directly to them. Most advisors will be honest about their fiduciary status. But to be certain, clients can use other means to confirm.

Directories and Resources

Registered investment advisors can be confirmed using the search tool from FINRA BrokerCheck or SEC’s Investment Adviser Public Disclosure. CFP® professionals can be confirmed on the CFP® Board’s Planner Search and CFA charter holders can be verified through the institute’s Member Directory

Clients can also check if a financial advisor is a member of NAPFA or ACA through their respective websites.  Members of all these organizations are fiduciaries. 

How To Make Sure You Choose the Right Financial Professional

If you are keen on having a financial advisor who always acts in your best interest, then you are better off with a fiduciary advisor. 

If you are more concerned about performance than legal obligation, you might be indifferent to whether your financial advisor (investment manager in this case) is a fiduciary or not. 

Ultimately, what matters is your individual situation and what you want out of your financial advisor.


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Last Modified: May 19, 2023

3 Cited Research Articles writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. SEC (2023, January 5). Investment Advisers Act of 1940. Retrieved from COMPS-1878.pdf (
  2. CFA Institute (2014). Code of Ethics and Standards of Professional Conduct. Retrieved from code-of-ethics-standards-professional-conduct.pdf (
  3. CFP Board (n.a). Code of Ethics and Standards of Conduct. Retrieved from Code of Ethics and Standards of Conduct | CFP Board