Fiduciary: The Duty of Care

Bob Stowe |

By Bob Stowe, CFP®

Definition of a fiduciary (from Investopedia):

  1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person rather than for his or her own profit.

In this relationship trust is not just a promise. Trust is asked for and given. There is confidence in the agent/trustee/advisor/counsel to act solely out of concern for the benefit of the client. Any conflict of interest between the two has been disclosed and dealt with.  A material conflict, even disclosed, should preclude the advisor from accepting the business.

This is the highest level of care. Legal protections for a fiduciary are few. The relationship here is that the advisor becomes an extension of the client’s will. The client contracts his business interests to his agent and the agent will then do whatever is best for the client.

Are all advisors fiduciaries? No. A lower standard of care is that of suitability. In this arrangement, a broker or registered representative is required to treat the client fairly and to know them well enough to make a suitable recommendation.   An example of suitability: a variable annuity might be suitable for a person of a certain age, risk tolerance and income need. If you fit that profile then a product, even one of marginal benefit, would be acceptable.

Are CFP’s® fiduciaries? Some are, but the designation alone does not promise a fiduciary relationship. The code of ethics of the CFP® designation is properly respectful of the advisor/client relationship. The code requires the planner to act with integrity, objectivity, competence, fairness, confidentiality, professionalism, and diligence.  Your broker can be all of those things and still sell you a variable annuity that barely satisfies the suitability rule and provides an astounding commission.

Doesn’t the definition of fiduciary preclude financial gain by the agent? Nope. The definition says that the agent will not, for example, sell the owner’s property with the agent’s markup added without the owner’s knowledge and assent. Under the fiduciary standard, the advisor is paid directly by the client for a fee that is transparently calculated and presented to the client.

How do you recognize a fiduciary in this business? Registered investment advisors are fiduciaries. This is not a certification of education or competency. The advisor’s company is registered either with the state or SEC, and its advisors are called investment advisor representatives. They are also known as ‘fee only’. To find financial planners that are fiduciaries, go to .

Brokers are not fiduciaries. How do you recognize brokers? Typically their print, television and online ads, including their websites, will include a line like this:

Brokerage, investment and financial advisory services are made available through Company X Inc. a registered broker dealer and Member FINRA and SIPC. Insurance products and annuities offered through Company Y.


If you have a question about a broker or investment advisor, there are resources. The SEC has provided a website, BrokerCheck, to inquire about the record of a broker, or registered representative as they are also known. Go to: (or google BrokerCheck)

Stowe Financial Planning, LLC is a registered investment advisory. We are a fee only financial planning and investment advisory in Texas and a member of NAPFA. NAPFA is the only association of fee only advisories. All of this means that we are a fiduciary for our clients and a great source of planning and investment advice.