The Fiduciary Standard
Only fee-based advisors can claim to be fiduciaries to their clients - a legal and ethical commitment that can make a big difference in the cost and quality of advice that you receive from your advisor.
"ARE YOU A FIDUCIARY?"
An essential question that you should always ask your financial advisor is, "are you a fiduciary?". A fiduciary is a financial advisor with both ethical and legal responsibilities to the client. When a fiduciary accepts your business, they are required by law to act in the best interests of the client and not themselves. They must act with what is called "undivided loyalty to the client"; because of this, commission-based financial advisors - even those claiming to be "fee-based" - are NOT fiduciaries. Instead, commission-based advisors operate under what is called a "suitability standard of care", which means that they are not required to recommend the best investments that they can offer, only one of many which is suitable based upon your demographic factors.
Only about 15% of all financial advisors in the United States meet the criteria for the fiduciary standard.