Is Your Financial Professional a Fiduciary? (Why You Should Know – And Care)
The answer to that question is important: It determines whether the person you’re working with is legally required to put your interests first.


Despite all the inside-the-industry fuss about the fate of the Department of Labor’s revised definition of “fiduciary,” commonly referred to as the fiduciary rule, many individuals still aren’t aware there’s a difference in the way various financial professionals are paid, or that they are held to different levels of accountability.
The rule, which was officially implemented on June 9, 2017, requires all financial professionals who work with retirement plans or provide retirement-planning advice to be legally and ethically required to rise to a fiduciary standard of care.
What does that mean to you?
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What ‘fiduciary’ means for investors
You might be somewhat familiar with the term “fiduciary,” although not necessarily in this context. First and foremost, it means your financial professional is obligated to put your needs before his own when making recommendations on financial products and strategies.
In addition to acting in the client’s best interests, a professional held to the fiduciary standard must fully disclose his compensation and any conflicts of interest to the client.
Beyond that, a fiduciary has a “duty of care” and must continually monitor not only his clients’ assets, but also any change in their financial situations.
Let’s say a client had a change of heart after going through a tough stock market period and wanted to adjust his risk tolerance. Or perhaps a personal tragedy resulted in extreme medical expenses, and a client needed a new strategy to mitigate that burden. A fiduciary is obligated to help the client re-evaluate his financial strategy and work with him to help align his strategy with his financial goals and objectives.
If you’ve already been working with a fiduciary, you know: The first client meeting is just the beginning. Beyond his legal duty to you, your financial professional has a stake in your success because he’s paid based on a percentage of your portfolio. If you do well, so does he.
Which financial professionals aren’t held to the fiduciary standard?
If your financial professional is a stockbroker, he likely is paid through commissions and fees, and he is not held to this same standard.
A stockbroker is defined as any person engaged in the business of buying and selling securities for the accounts of others. Brokers are generally not considered to have a fiduciary duty to their clients.
Instead of being obligated to put his clients’ interests ahead of his own, a broker is expected to deal fairly with them and to adhere to a standard of care known as the “suitability standard.” A recommendation must be suitable for the client’s individual financial goals and objectives, but it doesn’t have to be the best or the least expensive choice.
What investors should do
If you aren’t sure if your financial professional is held to the fiduciary standard, ask. Look at how the individual is compensated, if his first obligation is to you or to the firm he works for, and how often he actualy checks in with you to see if your personal or financial situation has changed in any way.
For a younger individual who is still in the accumulation phase – and can afford to risk the ups and downs of the market and what it might do to his portfolio – going with a broker might be an OK option. And for some, it might be the only option, as financial professionals held to the fiduciary standard often set minimum amounts on the portfolios they’re willing to work with.
But for those who are going to retire in 10 years or less, or who already are retired, having a financial professional who is held to the fiduciary standard may be a wise choice. This is the time to get your financial plan in order, and using the professional skills of an experienced financial professional could increase your probability for a successful lifetime of retirement bliss.
Kim Franke-Folstad contributed to this article.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Michael Woloshin is an Investment Adviser Representative, insurance professional and the founder and managing director of Woloshin Investment Management. His priority is helping those who are about to retire or who already have retired pursue their financial independence utilizing customized income strategies. Woloshin has over 35 years of experience advising clients.
-
Seven Surprising Reasons Retirees Are Going Back to Work
Sure, money is a big reason to come out of retirement, but it's not the only reason retirees are doing it.
-
Dow Gains 617 Points as Rate Cuts Near: Stock Market Today
Wednesday's economic data didn't shift Wall Street's expectations that the Fed is preparing for a rate cut at next week's meeting.
-
Four Clever and Tax-Efficient Ways to Ditch Concentrated Stock Holdings, From a Financial Planner
Holding too much of one company's stock can put your financial future at risk. Here are four ways you can strategically unwind such positions without triggering a massive tax bill.
-
Beyond Banking: How Credit Unions Serve Their Communities
Credit unions differentiate themselves from traditional banks by operating as member-owned financial cooperatives focused on community support and service rather than shareholder profit.
-
Answers to Every Early Retiree's Questions This Year, From a Wealth Adviser
From how to retire in a crazy market to how much to withdraw and how to spend without feeling guilty, a financial pro shares the advice he's given this year.
-
The Risks of Forced DST-to-UPREIT Conversions, From a Real Estate Expert
Some new Delaware statutory trust offerings are forcing investors into 721 UPREIT conversions at the end of the hold period, raising concerns about loss of control, limited liquidity, opaque valuations and unexpected tax liabilities.
-
I'm a Financial Adviser: You've Built Your Wealth, Now Make Sure Your Family Keeps It
The Great Wealth Transfer is well underway, yet too many families aren't ready. Here's how to bridge the generation gap that could threaten your legacy.
-
Want to Advance on the Job? Showing Some Courtesy and Appreciation Could Help
Two business professors share their insights about the impact of digital communication on the social skills of some in Gen Z and the importance of good manners on the job.
-
From Job Loss to Free Agent: A Financial Professional's Transition Playbook (and Pep Talk)
The American workforce is in transition, and if you're among those affected, take heart. You have the skills, experience and smarts that companies need.
-
A Financial Planner's Top Five Items to Prioritize When Your Spouse Is Ill
During tough times, it's easy to overlook important financial details, but you'll be so much better off if you take care of these things right now.