Fiduciary Standard

What Is the Fiduciary Standard?

Investment advisers owe clients duties of care and loyalty. Those duties apply throughout the advisory relationship, with specific obligations determined by its agreed scope. An adviser cannot obtain a blanket waiver of its federal fiduciary duty.

Core Duties

A CFP professional must act as a fiduciary whenever providing financial advice to a client under CFP Board's standards. Certification alone does not make every interaction an advisory engagement. Trustees and ERISA fiduciaries have duties under the law governing their particular roles.

Broker-Dealers and Reg BI

Since June 30, 2020, Regulation Best Interest has governed broker-dealer recommendations of securities transactions, investment strategies involving securities, and accounts to retail customers. Its four components are disclosure, care, conflict-of-interest and compliance obligations. Merely disclosing a conflict or finding a suitable product does not satisfy the entire rule. Form CRS is a related relationship-summary requirement, not the complete Reg BI disclosure obligation.

Reg BI applies when the recommendation is made. It does not automatically impose the same continuing monitoring obligation as an advisory relationship. A dual registrant must distinguish its brokerage and advisory capacities.

Comparing Investments

Costs, risks, benefits, reasonably available alternatives and the client's circumstances matter under the applicable standard. The cheapest product is not automatically best, and a higher-commission product cannot be justified merely because it is suitable. A limited product menu does not excuse advice outside the client's best interest.

Questions for a Professional

Ask which capacity the professional is acting in, which services and monitoring are included, how compensation works, and what material conflicts exist. Review registration and disclosure records.

Sources: SEC adviser interpretation, SEC Reg BI guide, and CFP Board standards.