Quick answer
A fiduciary is someone legally required to act in your best interest. In the US, investment advisers owe a fiduciary duty of care and loyalty across the whole relationship; brokers must follow Regulation Best Interest when they make a recommendation [1] [2].
Key points
- An investment adviser is paid to give advice about securities and owes clients a fiduciary duty that covers the entire relationship.
- That fiduciary duty includes a duty of care and a duty of loyalty.
- Brokers buy and sell securities, are usually paid per transaction, and must act in your best interest when they make a recommendation under Regulation Best Interest (since June 30, 2020).
- Both must address conflicts of interest — by eliminating them or, at a minimum, disclosing them.
- Form CRS, a short relationship summary, explains a firm's services, fees, conflicts and disciplinary history.
#What does "fiduciary" mean in investing?
A fiduciary is a person or firm with a legal duty to act in someone else's interest rather than their own. In US investing, the term usually refers to investment advisers. Investor.gov defines an investment adviser as "a firm or person that, for compensation, engages in the business of providing investment advice to others about the value of or about investing in securities" and says advisers "are required to act in your best interest and not put their interest ahead of yours" [3].
The SEC explains that an adviser's fiduciary duty "applies to the entire relationship between an investment adviser and its client" [4]. In practice that often means ongoing advice and monitoring of your account, not just a single recommendation [3].
#What are the duty of care and the duty of loyalty?
SEC staff describe the adviser standard as one that "encompasses both the duty of loyalty and duty of care" [1]. The duty of care is about the quality of advice: understanding your situation and giving advice that fits it. The duty of loyalty is about conflicts: the adviser must not put its own interests ahead of yours.
A conflict of interest is any situation where the professional could gain by steering you one way — for example, earning more on one product than another. Under the duty of loyalty, SEC staff say advisers "must eliminate a conflict of interest or, at a minimum, make full and fair disclosure of the conflict of interest such that a client can provide informed consent" [1]. Disclosure does not make a conflict disappear; it gives you the information to judge it.
#How is a broker's duty different?
A broker is "a firm or individual that engages in the business of buying and selling securities", and brokers typically work on a transactional basis, charging "a commission or markup every time you buy or sell" [2]. Brokers generally must register with the SEC and become members of FINRA [2].
Brokers are "required to act in your best interest when making a recommendation and not put their interest ahead of yours" [2]. The rule behind that is Regulation Best Interest (Reg BI), adopted by the SEC on June 5, 2019, with broker-dealers required to comply by June 30, 2020 [4]. The SEC said it "substantially enhances the broker-dealer standard of conduct beyond existing suitability obligations" [4].
Key dates for US advice standards
| Investment adviser | Broker (broker-dealer) | |
|---|---|---|
| Main job | Gives advice about securities, often with ongoing monitoring | Buys and sells securities for customers |
| Typical pay | Fee often based on assets in the account; may be hourly or flat | Commission or markup per transaction |
| Standard | Fiduciary duty (care and loyalty) for the whole relationship | Regulation Best Interest when making a recommendation |
| Registers with | SEC or state securities authorities | SEC, and member of FINRA |
| Where to look them up | IAPD (via Investor.gov) | BrokerCheck (via Investor.gov) |
#What does Regulation Best Interest require?
SEC staff explain that Reg BI's best-interest obligation is met by complying with four component obligations: Disclosure, Care, Conflict of Interest, and Compliance [1]. The SEC's adopting release adds detail on each [4]:
When the duty applies
Investment adviser (fiduciary)
- Applies to the entire relationship
- Duty of care and duty of loyalty
- Conflicts eliminated or fully disclosed
Broker (Reg BI)
- Applies when a recommendation is made
- Disclosure, care, conflict and compliance obligations
- Conflicts disclosed or eliminated; some sales incentives banned
#What is Form CRS and how do you use it?
Form CRS is a relationship summary that brokers and investment advisers must give retail investors; for advisers it is also called Form ADV Part 3 [5]. The SEC requires it to be delivered "at the beginning of their relationship" [4]. It covers the firm's services, its fees and costs, its conflicts of interest, its standard of conduct, and whether the firm and its professionals have reportable legal or disciplinary history [5]. You can find it through the Investor.gov search tool: search the firm, click "Get Details", then "Part 3 Relationship Summary" [5].
Form CRS also lists "conversation starters" to ask. One of the most useful is: "If I give you $1,000 to invest, how much will go to fees and costs, and how much will be invested for me?" [5] The example below shows why that question matters.
Worked example
Asking the $1,000 question
Two hypothetical offers. Offer A is a brokerage recommendation for a fund with a 5.75% one-time sales charge. Offer B is an advisory account charging 1% a year on assets. Growth is ignored to keep the fee math clear.
- Offer A on $1,000: sales charge (5.75% × $1,000)
- $57.50 in fees, $942.50 invested
- Offer B on $1,000: first-year fee (1% × $1,000)
- $10.00
- Offer A on $50,000: one-time charge (5.75% × $50,000)
- $2,875
- Offer B on $50,000: yearly fee (1% × $50,000)
- $500 a year
- Offer B over 5 years (5 × $500)
- $2,500
Neither structure is automatically cheaper: a one-time charge front-loads the cost, while an annual fee keeps adding up. Asking the question in dollars makes the trade-off visible.
Hypothetical fee levels, not typical or recommended rates. Calculated in Python. See expense ratios and fund fees for how ongoing fund costs add up.
#How can you find out which kind of professional you have?
Ask directly, read the firm's Form CRS, and look the person up. Investor.gov's search tool shows whether a professional is registered as an adviser, a broker or both, and routes you to the SEC's IAPD or FINRA's BrokerCheck [5]. Our guide to checking a broker or adviser walks through it. Another Form CRS conversation starter is worth asking word for word: "Is he or she a representative of an investment adviser or a broker-dealer?" [5]
Common beginner mistakes
Assuming every "financial adviser" is a fiduciary
Job titles vary. What matters is how the person and firm are registered and in what capacity they are acting for you.
Thinking "best interest" means no conflicts
Both advisers and brokers can have conflicts. The rules require them to be addressed — eliminated or disclosed — not that they never exist.
Skipping Form CRS
It is short and standardized. Reading it is the quickest way to learn how a firm is paid and what conflicts it has.
Expecting a fiduciary to prevent losses
A fiduciary duty is about how advice is given, not about outcomes. Investments recommended in good faith can still lose money.
What's the bottom line?
A fiduciary is legally bound to put your interests first. In the US, investment advisers carry a fiduciary duty of care and loyalty throughout the relationship, while brokers must meet Regulation Best Interest each time they recommend something. Form CRS spells out which you are dealing with, how the firm is paid and where its conflicts lie — read it, ask the conversation starters, and check the professional's record before you commit. For the warning signs of people who ignore all of these rules, see common investment scams.
Frequently asked questions
Is a broker a fiduciary?
Not in the same sense as an investment adviser. Brokers must act in your best interest when making a recommendation under Regulation Best Interest, while advisers owe a fiduciary duty across the whole relationship. Some professionals are registered as both.
Does a fiduciary have to charge low fees?
The duty of care includes giving advice that fits your situation, and Reg BI's care obligation requires brokers to consider costs. Neither rule sets a specific fee level, so compare fees yourself.
Where can I read a firm's Form CRS?
On Investor.gov, search for the firm, click Get Details, then open the Part 3 Relationship Summary. Firms must also give it to you at the start of the relationship.
When did Regulation Best Interest take effect?
The SEC adopted it on June 5, 2019, and broker-dealers had to begin complying by June 30, 2020.
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- U.S. Securities and Exchange Commission. Staff Bulletin: Standards of Conduct for Broker-Dealers and Investment Advisers — Conflicts of Interest (2026). Accessed 2026-10-03.A
- U.S. SEC — Investor.gov. Brokers (2026). Accessed 2026-10-03.A
- U.S. SEC — Investor.gov. Investment Advisers (2026). Accessed 2026-10-03.A
- U.S. Securities and Exchange Commission. SEC Adopts Rules and Interpretations to Enhance Protection and Clarity for Investors in Their Relationships With Financial Professionals (Press Release 2019-89) (2019). Accessed 2026-10-03.A
- U.S. SEC — Investor.gov. Relationship Summaries (Form CRS or Form ADV Part 3): Investor Bulletin (2026). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
