How to Become a Fiduciary Advisor

Becoming a fiduciary financial advisor means adhering to a legal and ethical standard that requires always acting in a client’s best interest. Unlike some other finance professionals, fiduciary advisors must provide unbiased recommendations, avoid conflicts of interest and disclose any potential financial incentives. To attain fiduciary status, professionals often pursue designations such as the Certified Financial Planner™ (CFP®) credential or register as an investment advisor representative (IAR) with the SEC or state regulators. This distinction sets you apart from other financial advisors, and signals to potential clients that you adhere to the highest legal and ethical standards.

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Fiduciary Financial Advisors vs. Other Advisors

The primary difference between fiduciary advisors and other types of advisors lies in the standards they must follow. Fiduciary advisors are legally bound to act in their clients’ best interests at all times, avoiding conflicts of interest and prioritizing the client’s financial goals over their own compensation.

At its core, a fiduciary duty is a legal and ethical obligation that requires an advisor to act in the best interest of their clients. This duty is the highest standard of care in the financial industry.

Non-fiduciary advisors, on the other hand, have historically been subject to the suitability standard, which requires recommendations to be merely “suitable” for the client’s financial situation. This has allowed non-fiduciary advisors to prioritize products that may benefit their own compensation, as long as the recommendations meet basic client requirements.

Regulation Best Interest (Reg BI), implemented by the SEC in 2020, bridges some of this gap. While it applies to broker-dealers and requires them to act in the client’s best interest when making recommendations, it stops short of imposing fiduciary-level duties. Under Reg BI, broker-dealers must disclose conflicts of interest and ensure reasonable diligence in their recommendations. However, fiduciary advisors remain distinct because they have an ongoing obligation to serve their clients’ interests comprehensively, rather than only during specific transactions.

Fiduciary advisors are also held accountable for their actions. Should a dispute arise, clients have legal recourse to address grievances, providing an additional layer of security and peace of mind.

How to Become a Fiduciary Advisor

To become a fiduciary advisor, you simply need to be registered as an investment advisor representative (IAR) in accordance with Investment Advisers Act of 1940. This typically means passing the Series 65 exam or meeting a state-specific exemption from the test, and then registering with a registered investment advisor (RIA), which is the legal entity that provides advisory services for clients.

Below are additional considerations broken into four categories, but they are not hard requirements:

1. Education and Certification

Building a strong foundation through formal education and specialized certifications is a key step toward becoming a fiduciary financial advisor.

• Obtain a bachelor’s degree: Most financial advisors start with pursuing a bachelor’s degree in a relevant field such as finance, accounting, economics, or business administration. These programs provide a solid foundation in financial principles, investment strategies and economic theory.
• Consider advanced education: While not required, obtaining a master’s degree or MBA with a focus on finance or financial planning can enhance your knowledge and make you stand out from other financial advisors. Advanced courses in financial planning, personal finance management and wealth management can be particularly beneficial.
• Consider specialized certifications: Consider enrolling in programs specifically designed for financial advisors, such as the Certified Financial Planner™ (CFP®) certification. The CFP® curriculum covers important areas like investment planning, tax planning, retirement and trust planning, and risk management, all of which are essential for fiduciary advisors. The certified trust and fiduciary advisor (CTFA) and chartered financial consultant (ChFC) designations also require charter holders to act as fiduciaries.

2. Professional Experience

Gaining practical experience and meeting state-specific requirements are essential for developing the skills and qualifications needed to excel as a fiduciary advisor.

• Hands-on experience: While education and certification in becoming a fiduciary advisor is crucial, it’s no substitute for hands-on experience. Mentors and peers can also provide valuable guidance and insight into client management, financial analysis, and the day-to-day responsibilities that come with being a fiduciary advisor. Professional experience can also provide access to industry conferences, seminars and workshops that can help you stay up to date on industry trends and best practices.
• State requirements: In order to become a fiduciary, most states require a certain amount of professional experience. For example, your state might require you to have a degree and five years of professional experience, or 10 years without a degree. You’ll want to confirm your state’s requirements to meet the criteria.

3. Registration and Licensing

Securing the appropriate licenses and adhering to fiduciary standards are critical components of establishing credibility and professionalism in this role.

• Certified financial fiduciary (CFF): In addition to any licensing you’re required to hold as a financial advisor (such as the Series 3, Series 6, Series 7, Series 63 or Series 65 licenses), you may want to you to obtain the certified financial fiduciary (CFF) designation. In general, to become a CFF, you’ll need to hold a bachelor’s or master’s degree in a relevant field, have several years of professional experience, pass a background check, pass the CFF exam, and register with the National Association of Certified Financial Fiduciaries (NACFF).
• Adhere to fiduciary standards: Once registered as a fiduciary advisor, you must adhere to fiduciary standards. This means always acting in the best interests of your clients, providing full disclosure of any potential conflicts of interest, and showing transparency in all financial dealings.

4. Continuing Education and Professional Development

Staying updated on industry trends and engaging in professional growth opportunities ensures long-term success as a fiduciary advisor.

• Stay current with industry changes: As a fiduciary advisor, it’s important to stay informed about changes in laws, regulations and best practices. One way to do this is by participating in continuing education programs. Many certifications, including the CFP®, require ongoing education to maintain your credentials.
• Join professional organizations: Consider joining professional organizations such as the Financial Planning Association (FPA) or the National Association of Personal Financial Advisors (NAPFA). These organizations provide resources, networking opportunities and continuing education to support your career development.

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What Skills Do Fiduciary Financial Advisors Have?

Fiduciary financial advisors need a blend of technical expertise and interpersonal abilities to excel in their roles. Strong analytical skills are essential for evaluating financial data, developing tailored strategies and recommending investment options that align with a client’s goals. Advisors must also stay up-to-date on regulatory changes, such as fiduciary standards and compliance requirements, to meet their legal obligations.

Interpersonal skills are equally important, as fiduciary advisors must build trust and maintain clear communication with clients. Empathy and active listening help advisors understand their clients’ unique financial situations and long-term objectives. Transparency in discussing potential conflicts of interest or fees further enhances client relationships.

In addition, problem-solving and ethical decision-making are critical for navigating complex financial scenarios and ensuring that recommendations consistently prioritize the client’s best interests. This combination of technical knowledge and relationship management sets fiduciary advisors apart in the financial planning industry.

Bottom Line

For advisors, operating under a fiduciary duty is both a responsibility and a distinguishing feature. It sets them apart in a crowded marketplace, and can help attract clients who value integrity, as well as foster long-term relationships with those clients built on confidence and trust. While becoming a fiduciary advisor requires much of the same criteria as a financial advisor, key licensing and registration requirements, as well as the adherence to a fiduciary duty, sets this career pathway apart.

Tips for Becoming a Fiduciary Advisor

• If you don’t have a lot of time to actively spend on marketing, you might consider using an online marketing service that brings leads to you. SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
• The fiduciary standard does not apply to all financial professionals. Commission-based practices, such as brokerages, need special licenses to sell securities and other products. In these cases, the suitability standard applies.

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