A Fiduciary Comes with Responsibilities to the Client

By Stephen Kelley, CSA



As a Registered Investment Adviser (RIA) with a Series #65 securities license, we hold a fiduciary duty to you. This means that we are legally bound to put your interests above those of anyone else, including ourselves.

Now you might reasonably think that anyone offering financial advice or services to clients is required to be a fiduciary. Sadly, if you thought that, you’d be wrong. Some estimates claim that only 15 percent of advisors have a fiduciary duty to their clients. The Paladin Registry puts the number even lower, estimating that just one in 12 (8.3 percent) advisors have a fiduciary responsibility.

For the most part, stockbrokers (also called “Registered Representatives,” “Account Executives,” “Financial Advisors,” or “Wealth Managers”) are not fiduciaries, even though they are allowed to portray themselves as full-service investment advisors. If your stockbroker/registered representative/account executive/financial advisor/wealth manager holds a series seven [#7] securities license, then it’s probable that they aren’t a fiduciary.

This was made amply clear in the movie, “The Wolf of Wall Street,” a biopic about Jordan Belfort, a stockbroker who made his fortune selling junk stocks and bonds to middle-class investors: in other words, by cheating them. Much of it was perfectly legal. The SEC went after Belfort’s company, Stratton Oakmont, for nearly a decade before it was able to shut it down. The point being that even in the face of egregious wrongdoing, theft, fraud and a virtual sea of drugs and blatant hedonism, the securities laws in this country are so loose that it took billions in theft and a decade of suspected and known fraud to step in and stop the abuse. And this movie was based on a true story.

That’s why a fiduciary duty is so important to a client. Being a fiduciary is a legal distinction. A Registered Investment Advisor (RIA) or Investment Advisor Representative (IAR) who holds a Series #65 securities license, subject to the Investment Advisers Act of 1940, is a fiduciary. The legal investment advising standards that govern a non-fiduciary stockbroker and a fiduciary Registered Investment Advisor are very different.

A Registered Investment Advisor is legally required to follow the “trust” standard — the highest known in law — which requires it to place the interests of its clients ahead of its own and fulfill critical fiduciary duties of trust and confidence. Under the fiduciary trust standard, a Registered Investment Advisor must provide its “best advice” to a client. A non-fiduciary stockbroker (like the coveted Series #7 of “The Wolf of Wall Street”) follows only the “suitability” standard, which doesn’t require a stockbroker to place the interests of his clients ahead of its own. Under the non-fiduciary suitability standard, a stockbroker need provide only “suitable advice” to his clients — even if the stockbroker knows that the advice is not the best advice for the client.


The table below helps summarize which professionals are fiduciaries.

Type of ProfessionalAre They A Fiduciary?
Trust OfficerYes
Stock BrokerNo
Insurance AgentNo
Registered RepresentativeNo
CFP PractitionerMaybe
Financial PlannerMaybe
Registered Investment AdviserYes
NAFPA-Registered Financial AdvisorYes


MORE: https://medicalexecutivepost.com/2022/05/21/an-interview-with-bennett-aikin-aif/

RELATED: https://www.kitces.com/blog/the-4-different-types-of-financial-advisor-fiduciaries/

CFPs: https://medicalexecutivepost.com/2016/11/18/why-we-cannot-assume-cfp-equals-fiduciary/

INVESTING: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283


Thank You


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