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What does a fiduciary investment advisor do?

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Quick Answer

A fiduciary investment advisor is bound by the Investment Advisors Act of 1940 to look out foremost for his client's interest and place such interests above his own when giving investment advice, according to Investopedia. Fiduciary advisors must delineate any potential conflicts of interest to their clients when giving advice.

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Full Answer

Fiduciary advisors must ensure that they offer advice from a fully informed position, explains Investopedia. They need to conduct extensive research and analyze all available information before giving financial advice. Such dictated loyalty makes the fiduciary standard stricter than standards for other types of advisors.

Advisors must also act under the "best execution" standards, according to Investopedia. This means that advisors must guide their clients to the most advantageous position to their knowledge when making a trade. This includes the combination of best financial gains and most effective execution. These fiduciary standards are stricter than sustainability standards, which mandate that brokers make recommendations in the best interests of their clients. A broker must make these recommendations to the best of his knowledge, but his loyalty is not legally bound to the client as it is under the fiduciary standards, as most brokers primary loyalty is to the entity for which they work.

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