What is a Fiduciary?

OR So I have to ask every advisor if they put my best interests first? That’s not just the default??

You know how every doctor has to take a Hippocratic oath to “first, do no harm” and treat every patient to the best of their ability?

Well, one of the things that totally sucks about the financial services industry is that we have a version of this - the fiduciary oath - but not every advisor is required to take it.

UM WHAT

Unfortunately, as it stands right now, many advisors are only required to make sure the products they sell you pass the suitability test, which means as long as the product meets your goals and risk tolerance, they can present a more expensive product to you as long as they give you disclosures about fees. They have no obligation to tell you about the less expensive, better option. YES, this how it is right now.

One of the top 10 questions that shows up on every “what should you ask an advisor list” is: “Are you a fiduciary?” Seems simple enough, someone tells you yes or no and you can move on.

But wait! There's more.

In this industry, you have the option to be something called "dually registered." Stay with us here. All financial advisors are required to register with FINRA (the organization that regulates financial firms and individuals) if they want to give financial advice or sell financial products.

You can register as a "Registered Broker" or as an "Investment Advisor."

Registered brokers are the advisors who sell products and receive commission for selling these products. They are not required to be fiduciaries and are only held to the "suitability" standard we talked about above. Investment advisors are required to be fiduciaries. Cool cool cool.

("Broker registration on FINRA broker check)

("Investment Adviser" registration on FINRA broker check)

Here's the wrinkle - financial advisors can choose to be registered as brokers and investment advisors - dually registered. This means they can technically say "yes" to the fiduciary question because they are an investment advisor, but sometimes--specifically when they are trying to sell you a financial product--they don't have to be a fiduciary in that moment. wtf.

(dually registered as a "Broker" AND "Investment Adviser" on FINRA broker check)

As clients, as consumers, we have a right to assume that the professionals handling our finances have our best interests at heart. We shouldn’t have to ask if someone is going to screw us over or not and if someone does, it shouldn’t be our fault that it happened. But alas, here we are.

Please make sure you ask any financial professional who you plan to have a transaction or relationship with, and if they don’t know how to answer that question, find someone else. You can also check for yourself on FINRA's Broker Check (https://brokercheck.finra.org/)and see how they are registered.

Here’s the fiduciary oath we at Brunch & Budget took.

So yes, we are fiduciaries because that’s the f*cking right thing to do and we are also truly appalled that the industry hasn’t made this standard across the board.

If you want to hear more rants about how folks have tried to make fiduciaries the standard and the pushback they’ve gotten, check out this podcast episode: https://brunchandbudget.com/podcast/bnb93/