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How to Tell if Your Advisor is a Fiduciary (and Why it Matters)

Working with a financial advisor can be scary. Many people have been burned in the past or heard horror stories from friends. Whether it's brokers selling unnecessary services to collect a commission, big hidden fees, or just bad advice, poor experiences are all too common.

Going the DIY route or using a robo-advisor for retirement planning might seem appealing. But it's not the same. A trusted financial advisor has the experience and expertise to provide insight that no algorithm can match. Thankfully, there's a way to make sure you get honest advice for your financial future - working with a fiduciary. So what is a fiduciary and how do you know if your financial advisor is one?

Understanding the Different Types of Financial Advisors

Financial advisors use a wide variety of titles, some of which have nothing to do with credentials or certifications. While there are some specialized roles in finance, and service offerings range a lot, you’ll likely encounter a few primary types of advisors.

Brokers & Broker-dealers

Broker-dealers are one of the most common types of advisors. They buy and sell various types of investments such as stocks, mutual funds, and bonds. Some companies are strictly brokers, buying or selling on behalf of clients. Others are only dealers, buying or selling for their own accounts. However, most large banks and Wall Street firms are broker-dealers and handle investments for both clients and themselves.


CERTIFIED FINANCIAL PLANNER™ Professionals are advisors that hold one of the most rigorous credentials in the industry. CFP® Certificants must have several years of financial planning experience, pass the CFP® exam, and agree to the CFP® Board of Standards’ ethical code. Unlike many other advisors, CFP® professionals are fiduciaries, which means they must always act in their clients' best interests.


Robo-advisors are low-cost, automated investing services. Users set up a series of goals and parameters for their account, which the robo-advisor plugs into algorithms to build a portfolio. While the low fees can be appealing, robo-advisors are a far cry from getting personalized advice from a professional financial planner. You risk ending up with a portfolio that doesn't align with your financial goals, not to mention missing out on a full-spectrum of services like estate planning or financial education. 

Chartered Financial Consultants

Like CERTIFIED FINANCIAL PLANNER™ professionals, Chartered Financial Consultants (ChFCs) are held to a fiduciary standard (by the American College of Financial Services’ Code of Ethics). FYI, the ChFC designation covers the same core curriculum as the CFP® designation, plus additional electives focusing on areas of personal finance.

How to Tell if an Advisor Is a Fiduciary

There are many questions you should ask a prospective financial advisor before entrusting them with your retirement savings plan. You’ll want to find an advisor you can trust, whose fees are reasonable, and who you feel comfortable with. It’s also important to determine whether or not they’re a fiduciary. There are three primary ways to do this:

  • Certifications - CFP® practitioners are all registered in the CFP® Board’s online database and held to a fiduciary standard. Conversely, any advisor with a series 6 or 7 license, or who’s registered as a broker or dealer, is a salesperson. They’re not under any obligation to act in your best interest.
  • Fee Structure - Fiduciaries always operate on a fee-only basis. This means that they charge a flat fee, hourly rate, or a percentage of your portfolio’s value. They’re also legally prohibited from charging commission or receiving compensation from vendors. Some advisors will play both sides by using a fee-based model and claiming to be independent. That isn’t the same as fee-only, though, as they can still earn commissions and can receive other types of compensation.
  • Just Ask - While credentials and fees are obvious signs, sometimes it simply makes sense to ask an advisor if they’re a fiduciary. They should have a clear and confident answer. If they try to make excuses, you probably can’t count on them to give honest financial advice.

Five Reasons You Should Choose a Fiduciary for Your Retirement Planning

Planning for retirement is a long-term process. You need an advisor that you can trust, not just to give good advice today, but to make sure you remain on the path to a comfortable retirement. Fiduciaries have several advantages over other types of financial advisors:.

    1. Clear Fees -  Fiduciaries are required to disclose all fees upfront, so you’ll never be surprised to see your portfolio’s growth hindered by hidden expenses
    2. Expertise & Experience - The CFP® certification process is the gold standard for financial planning - any advisor who passes it has the background and knowledge to provide sound advice
    3. Holistic Planning - Since fiduciaries are focused on your best interest, rather than selling a product or service, they can take a big picture approach to help you plan for retirement 
    4. No Conflicts of Interest - Thanks to the CFP® Board’s ethical standards, fiduciaries must not have any conflicts of interest when giving advice
    5. Ongoing Support - Along with providing advice that’s in your best interest, fiduciaries are also responsible for monitoring their recommendations to make sure they continue to meet your needs

If you’re nearing or saving up for retirement, a fiduciary can help you prepare for a secure financial future. Not sure if you're working with a fiduciary advisor? Download a copy of our Fiduciary Oath Guide to make sure your retirement planning is in good hands.

Denver Fiduciary Guide

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