top of page
Search

What is a Fiduciary?

Fiduciary financial planning meeting

In today’s complex financial landscape, choosing a financial advisor is no small task. With thousands of advisors offering a wide range of services—some fee-based, some commission-driven—it’s easy to feel overwhelmed. What most investors don’t realize is that not all advisors are legally required to put your interests first. 


That’s why the “fiduciary standard” was termed for some financial planners. A fiduciary is obligated to act in your best interest at all times. This distinction isn’t just a semantic or legal technicality—it’s the bedrock of trustworthy, client-first financial guidance. 


This blog will explore what fiduciary financial advisors are, why they matter, how to spot them, and where to find trustworthy help. 


1. What Is a Fiduciary Financial Advisor? 


A fiduciary financial advisor is someone who is legally and ethically bound to act in your best interest. That means their guidance, strategies, and investment recommendations must benefit you—not their own wallet. 


This contrasts with non-fiduciary advisors, like broker-dealers or insurance agents, who are only required to recommend “suitable” investments. While “suitable” sounds safe, it leaves a lot of room for advisors to suggest products that offer them higher compensation—even if better options exist. Think about it this way – when you are shopping for a new suit, would you simply buy the first one you saw that you could fit into? This would work in theory, but finding one in the right size, the right color and having it tailored to fit just right will not only help you feel and look better, but will be way more valuable to you in the long run. 


Key Characteristics of a Fiduciary Advisor: 

  • Registered Investment Advisor (RIA) designation 

  • Transparent, fee-based or fee-only compensation 

  • No commissions from third-party product providers 

  • Holistic financial planning—not just investment sales 


2. Why Fiduciary Duty Matters So Much:

 

Let’s consider a scenario: 

Imagine you go to a doctor for help with a serious health issue. You’d expect them to prescribe the best possible treatment for your condition—not the one that earns them the highest bonus from a pharmaceutical rep. 


Now replace the doctor with a financial advisor, and the stakes are just as high. This is your family’s future, your retirement, and your legacy. Wouldn’t you want the advice you receive to be completely unbiased? 


That’s what fiduciary duty ensures. 


The Risks of Non-Fiduciary Advice: 

  • Hidden fees and commissions 

  • Recommendations based on sales quotas 

  • Conflicts of interest that may not be disclosed 


According to 360 Financial, fiduciary advisors remove that ambiguity. You know exactly where their compensation comes from, and you can trust that their advice is tailored specifically to your goals. 


3. How to Tell If a Financial Advisor Is a Fiduciary:

 

Many advisors use the term “financial advisor” or “wealth manager,” but that doesn’t automatically mean they’re fiduciaries. Fortunately, there are clear ways to determine whether someone is acting in your best interest. 


Questions to Ask: 

  1. Are you a fiduciary 100% of the time? Some advisors act as fiduciaries only for part of the relationship. Ensure they commit fully. 

  2. How are you compensated? Look for fee-only or fee-based structures. Avoid commission-only advisors if transparency is a priority. 

  3. Do you receive commissions for recommending any products? A fiduciary should avoid or clearly disclose conflicts of interest. 

  4. Are you registered with the SEC or a state regulator? Fiduciary advisors are typically Registered Investment Advisors (RIAs) with legal oversight. 


Helpful Tools for Verification: 

  • FINRA BrokerCheck: See any disciplinary history. 

  • SEC Investment Adviser Public Disclosure: Check if they’re registered and view their Form ADV. 

  • Review their Form ADV Part 2A, which outlines services, fees, and conflicts of interest. 


4. What Services Do Fiduciary Advisors Offer? 


Hiring a fiduciary advisor isn’t just about investments. These professionals take a comprehensive approach to financial health, including: 


  • Retirement planning 

  • Tax-efficient investing 

  • Estate and legacy planning 

  • College savings and education planning 

  • Budgeting and debt strategies 

  • Risk management (insurance, long-term care analysis) 

  • Charitable giving strategies 


By focusing on your entire financial life—not just your portfolio—fiduciary advisors help you align your money with your long-term goals and values. 


5. Common Myths About Fiduciary Advisors:

 

Despite the benefits, some investors hesitate to hire fiduciary advisors due to lingering misconceptions. Let’s clear up a few: 


Myth 1: “They’re more expensive.” 

Truth: While fee-only advisors charge directly for their time or a percentage of your assets, they eliminate hidden commissions. You’ll often pay less overall—and you’ll always know what you’re paying for. 


Myth 2: “They only work with the wealthy.” 

Truth: Many fiduciary advisors work with clients at all stages, including young professionals, families, and business owners. 


Myth 3: “My bank already provides advice.” 

Truth: Many bank advisors are not fiduciaries. They may be incentivized to sell certain products—especially proprietary mutual funds or insurance policies. 


6. The Long-Term Value of Fiduciary Advice 


A study by Vanguard estimates that good financial advice adds about 3% in net returns per year, not through picking better stocks but by helping you: 

  • Avoid costly mistakes 

  • Stick to your long-term strategy 

  • Optimize tax strategies 

  • Rebalance portfolios wisely 


Now imagine those results compounded over 30 years. Fiduciary advice isn’t just about peace of mind—it’s a long-term asset in itself. 


7. What to Do Next: Steps to Take Today 


Ready to make sure your advisor is truly on your side? Here’s how to start: 


  1. Audit Your Current Advisor 

    1. Ask if they are a fiduciary. If they can’t say “yes” with confidence, investigate further. 

  2. Review their credentials

    1. Look for CFP®, CFA®, or AIF® designations and RIA status. 

  3. Shop Around

    1. Even if you’re satisfied with your current advisor, it’s smart to compare options. 

  4. Schedule Interviews

    1. A great advisor will welcome your questions. Prepare 5–7 key questions about their philosophy, fiduciary duty, and compensation. 


Final Thoughts 


In an era of financial uncertainty, hiring the right advisor is more important than ever. Fiduciary financial advisors stand out not just for what they do—but for how and why they do it. Their legal duty to put your interests first is more than a title; it’s a foundation of trust, clarity, and long-term success. 


Don’t leave your future in the hands of an advisor whose priorities might conflict with yours. Take the time to find someone who sits on your side of the table—and walks with you for the long haul. 

Comments

​

Providence Capital LLC (“RIA Firm”) is a registered investment adviser located in Springdale, AR. Providence Capital LLC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Providence Capital LLC’s  web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Providence Capital LLC’s web site on the internet should not be construed by any consumer and/or prospective client as Providence Capital LLC’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

 

Any subsequent, direct communication by Providence Capital LLC with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Providence Capital LLC, please contact the state securities regulators for those states in which Providence Capital LLC maintains a registration filing. A copy of Providence Capital LLC’s current written disclosure statement discussing RIA Firm Name’s business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Providence Capital LLC upon written request. Providence Capital LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Providence Capital LLC’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

 

This website and information are provided for guidance and information purposes only.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy.  This website and information are not intended to provide investment, tax, or legal advice.

bottom of page