“Fiduciary” means the person has to put your interest ahead of their own. It sounds like the minimum. It is not how the whole industry works.
The good news is that you do not have to take anyone’s word for it. Not theirs, and not mine. It takes about five minutes.
Step 1: Look them up
The SEC runs a free search called Check Out Your Investment Professional. Type in the person’s name. You will see whether they are registered as an investment adviser, as a broker, or as both.
That one line tells you a lot.
An investment adviser is, in the SEC’s words, required to act in your best interest and not put their interest ahead of yours.
A broker has to act in your best interest when making a recommendation. The duty is tied to the recommendation. Brokers are usually paid a commission or markup when you buy or sell.
Both. Many people are registered as both. Then the question becomes which hat they are wearing on which of your accounts. Same person, same office, different duty.
Step 2: Read the two-page summary
Brokers and SEC-registered advisers have to give ordinary investors a short document called a relationship summary, also known as Form CRS. It covers the services, the fees, the conflicts of interest, the standard of conduct, and whether the firm or its people have a disciplinary history.
You can pull it up in the same search tool. Choose the firm, open the details, and click the relationship summary. Smaller advisers registered with a state, like my firm, publish the same information in a brochure called Form ADV Part 2. It is in the same search.
Read the conflicts section first. It is the firm telling you, in its own words, how it makes money from you. Most people have never read their own advisor’s. It is two pages.
Step 3: Ask one question in writing
Send an email. Keep it short:
“Are you acting as a fiduciary at all times, on all of my accounts? Will you put that in writing?”
A fiduciary says yes and signs it. Anything else is also an answer. “We always act in your best interest” is not the same sentence. “It depends on the account” is honest, and worth a follow-up. A phone call in reply to a written question tells you something too.
You are not being difficult. You are asking who they work for.
What “fiduciary” does not tell you
Being a fiduciary is a floor. It does not make someone good, or right for you, or free of conflicts.
I am a fiduciary and I still have one. A fee based on a percentage of your assets quietly prefers that your money stays with me. I say so in public, on my own scorecard.
So once the legal box is checked, I use five more questions, the same five I run on my own firm. They are on the page called Can I trust my financial advisor? If you want the longer explanation of who is who, there is also fiduciary versus financial advisor versus broker.
If the answer surprises you
Do not panic and do not move anything this week. Plenty of people work happily with a broker for years. What matters is that you know which relationship you are in, and what you are paying inside it.
Related questions: financial advisor red flags, what to ask at your annual review, why your advisor is pushing life insurance and whether to leave your advisor.
One question for this week: have you ever read your advisor’s two-page summary? It is free, it is public, and it takes less time than this article did.
As always, if you want to talk any of this through, the door is open. Genti