What You Need to Know About Fiduciary Duty

If you’ve spent much time reading personal finance media, you’ve likely heard the term “fiduciary.” But if you haven’t, no need to fret. It’s a complex term that’s brought quite a bit of confusion to the industry since its inception. In the hopes of clarifying some things for you, we’re here to explain!

What exactly is a fiduciary?
Broadly speaking, a fiduciary is a person who agrees to act in your best interest -- and not their own -- when it comes to managing your money.

Wait...so not everyone who helps manage money has to act in my best interest?
That’s right! And most consumers don’t know this.

Let’s break it down further.
A fiduciary typically doesn’t take commissions from mutual fund providers or investment firms in exchange for steering your money into their funds.

Most fiduciaries choose to work on a fee-only basis, which means that they charge their client a fee, and that’s how they get paid. They’re not getting kickbacks from investment firms, banks, financial institutions, etc., at the same time.

This is both an ethical and legal concept, so not only do fiduciaries have a moral obligation to hold your interests above their own, but they also have to do so BY LAW. In other words, if they don’t act that way, you have legal recourse available.

Why does it matter?
Well, there are a ton of folks acting as financial advisors, coaches and more who are not fiduciaries. They can accept these types of commission payments, and even though they may say they are not swayed by their relationships with outside companies, that likely isn’t the case.

So, who is a fiduciary?
A certified financial planner is a fiduciary, as is a registered investment adviser. Brokers, advisors and coaches are not required to be fiduciaries, but some may act in that capacity. Some lawyers can also act as fiduciaries.

How can I tell if the person I am working with is a fiduciary?
Ask lots of questions. You can ask them outright whether they are, and they should give you an honest answer.

If you’re not convinced, ask them if they receive commission beyond what clients pay them. If they do, there’s a clear conflict of interest.

You can also check to see if that person has any sort of credentials on BrokerCheck. The listings there will show you whether the person is a registered investment adviser or working in some other capacity. To check if someone is a certified financial planner, use this link.

Is She Spends a fiduciary?
That is a complex question! She Spends as an entity is not a fiduciary. We do our very best to ensure that we’re acting in your best interests, but we do not have a legal obligation to do so. We also receive commissions from Ellevest, which bears on our ability to act as a fiduciary.

Ellevest itself is a fiduciary. Because of that, there are certain, specific rules for how we, as an affiliate, can write things about Ellevest.

Brooklyn Plans, the financial planning firm we work with to offer coaching services, is a fiduciary. Alicia, our founder who is working as a coach with Brooklyn Plans, will be a fiduciary once she passes the CFP exam.

Got questions about what it means to be a fiduciary? Shoot us an email and we’ll do our best to answer!