What is Fiduciary?
A fiduciary is a person or firm legally required to act in the client’s best interest at all times, with a duty of loyalty and care that overrides their own financial interest. In financial services, the fiduciary standard applies to Registered Investment Advisors (RIAs), ERISA-covered plan trustees, and trustees of trusts and estates.
Fiduciary Duties
A fiduciary owes two primary duties:
- Duty of loyalty: Place the client’s interest ahead of the fiduciary’s own. Disclose and avoid conflicts where possible.
- Duty of care: Act with the skill, prudence, and diligence of a knowledgeable professional in similar circumstances.
These duties continue throughout the relationship, not just at the point of sale. A fiduciary who recommends an investment must monitor it, evaluate alternatives over time, and update recommendations as the client’s situation changes.
Fiduciary vs Best Interest vs Suitability
Three different standards apply to financial recommendations:
- Suitability: Lowest bar – recommend a product that’s appropriate for the client
- Best Interest: Middle bar – act in the client’s best interest at the time of recommendation (most states’ annuity rule)
- Fiduciary: Highest bar – duty of loyalty and care, ongoing
Annuity Agents and Fiduciary Status
Insurance-licensed annuity agents are generally NOT fiduciaries unless they hold an additional fiduciary credential (such as a Series 65 advisor license or trust officer designation). A licensed agent operating under the best interest standard has a meaningful obligation to you, but it’s not the same as a full fiduciary relationship. Always ask any advisor working with retirement assets which standard applies to their recommendations.
