Meridian Blog

Before I ever had any inclination to work in the financial industry, I remember an older co-worker of mine, telling a group of us younger fellows that he was about to give us a piece of advice. The advice was that if we ever were to have somebody manage our money, we needed to make sure that it would be with a fee-only fiduciary. At that time, I was still fresh out of college, so I didn’t feel like it applied to me, but for some reason I have always remembered that moment. Well, fast forward 10 years, I am now in this industry, and I can see for myself why it is so important and appreciate his advice so much more.

When it comes to managing your money, planning for retirement, or investing for the future, you’ve probably heard the terms “fiduciary” and “financial advisor” thrown around. While they may sound similar—and in many cases, they overlap—they’re not interchangeable. Understanding the difference could have a huge impact on your financial well-being.

Let’s break it down: What exactly is a fiduciary? How is that different from a financial advisor? And why should you care?

What Is a Financial Advisor?

“Financial advisor” is a broad term. It refers to any professional who offers financial services or advice to clients. This can include investment planning, retirement strategies, estate planning, tax optimization, budgeting help, and more.

Some common types of financial advisors include:

• Brokers
• Insurance agents
• Wealth managers
• CERTIFIED FINANCIAL PLANNER™
• Registered Investment Advisors (RIAs)

However, the title “financial advisor” isn’t strictly regulated. Almost anyone offering financial guidance can call themselves a financial advisor—even if they don’t have a fiduciary duty to act in your best interest. This is where things get murky.

What Is a Fiduciary?

A fiduciary is someone who is legally and ethically obligated to act in the best interests of their client. Fiduciaries must avoid conflicts of interest and disclose any potential ones. They are bound to a higher standard of care by putting your financial needs above their own profit.

Fiduciaries are often Registered Investment Advisors (RIAs) or a CFP® who operates under the fiduciary standard laid out by the Investment Advisers Act of 1940. This law requires advisors who charge a fee for financial advice to put clients’ interest first.

Think of it this way: If you are hiring someone to help you make life-altering decisions with your money, wouldn’t you want them to do what’s best for you, not what earns them the biggest commission? That’s what my colleague was getting at when he gathered us around. Unfortunately for him, he had to learn his lesson the hard way.

Fiduciary Duty vs. Suitability Standard

Here’s a key difference: Not all financial advisors are fiduciaries. Many operate under the suitability standard instead.

The suitability standard simply means the investment or product they recommend must be “suitable” for your situation—not necessarily the best or lowest-cost option. This leaves room for advisors to recommend products that earn them higher commissions or incentives, even when cheaper or better options exist.

In contrast, a fiduciary must choose the option that’s truly best for you, even if it means less profit for them.

Real-World Example

Let’s say you’re looking to invest $50,000 for retirement.

• A non-fiduciary advisor might recommend a mutual fund with a 5% upfront commission and high annual fees, because they receive a cut from selling it. It may be “suitable” for your situation, but not optimal.
• A fiduciary advisor, on the other hand, would be required to compare your options and potentially recommend a low-cost index fund or ETF that serves your goals better without earning them a commission.

That’s a big difference in long-term outcomes.

How Do You Know If Your Advisor Is a Fiduciary?

Here are a few ways to find out:

• Ask directly: “Are you a fiduciary at all times when working with me?” If the answer is anything less than a clear “Yes,” proceed with caution.
• Check credentials: A CFP®, RIAs, and fee-only advisors are often fiduciaries. Ask how they’re compensated—fiduciaries typically work on a fee-only basis rather than commission.
• Research them: Use the SEC’s Investment Adviser Public Disclosure website or FINRA’s BrokerCheck tool to learn more about an advisor’s background and standards.

Why This Matters to You

The relationship between you and your financial advisor should be built on trust. If your advisor isn’t acting in your best interest, they could steer you toward expensive or unnecessary products that benefit them more than you.

Working with a fiduciary means:

• Greater transparency
• Fewer hidden fees or commissions
• Investment strategies aligned with your goals—not someone else’s bottom line

For major life decisions, like buying a home, retiring, or leaving a legacy, working with someone who legally must prioritize you can make all the difference.

The Bottom Line

All fiduciaries are financial advisors, but not all financial advisors are fiduciaries. If you want advice that’s truly centered around your best interests, seek out a fiduciary.

Before hiring anyone to guide your financial future, ask the right questions, do your homework, and choose someone who treats your money like their own. Because when it comes to your financial well-being, you deserve more than “suitable”—you deserve the best.

Daisy can relax knowing that her parents always have her best interests in mind. (And yes, she prefers the mulch pile instead of her brand-new doghouse she refuses to use.)