Glossary
Fiduciary
A person or firm legally bound to act in a client's best interest, such as a registered investment adviser.
On this page
A fiduciary is someone who manages money or gives advice on another person's behalf and is legally required to put that person's interests first. The duty has two parts: care (advice must be well researched and suitable to the client's goals) and loyalty (the adviser may not favor itself, and conflicts must be eliminated or fully disclosed). For investors, knowing whether the person across the table is a fiduciary tells you what standard their recommendations must meet.
Who owes it in US investing
- Registered investment advisers (RIAs) owe a fiduciary duty to clients under the Investment Advisers Act of 1940, covering the whole relationship, not just single trades. The SEC restated that duty in a 2019 interpretation.
- Broker-dealers recommending securities to retail customers follow Regulation Best Interest, in force since June 30, 2020. It requires acting in the customer's best interest at the time of a recommendation and managing conflicts, but it is not identical to the adviser fiduciary standard, and it generally does not impose an ongoing duty to monitor an account.
- Retirement plans. Under ERISA, people who manage workplace plans or give paid advice on them can be fiduciaries with strict rules on prohibited transactions.
- Trustees and executors owe fiduciary duties under state law.
How to check
Firms must give retail investors a short relationship summary (Form CRS) describing services, fees and conflicts. Adviser and broker records can be searched on the SEC's Investment Adviser Public Disclosure site and FINRA's BrokerCheck. Many professionals are dually registered and can wear either hat, so ask in which capacity a recommendation is made.