It has been estimated that 85% of financial advisors do not have fiduciary responsibility. They are usually stockbrokers, insurance agents, or simply sales representatives. They may hold various licenses, but since they are not fiduciaries, they often are more interested in selling insurance and investment products than managing your portfolio.

Non-fiduciary advisors are compensated by commissions, which are often the equivalent management fees over several years. In the end, if you're dissatisfied with your service, the only way to get out of the product is to pay a large surrender fee.

Titles for non-fiduciary advisors are unregulated, which means these advisors don't need to call themselves brokers or insurance agents, but can adopt titles like: financial advisor, vice president, financial consultant, financial planner or whatever else sounds good. They usually do not have a fiduciary responsibility to put an investor’s interests ahead of their own, and as such are more interested in selling financial products from which they will receive a commission.

These sales reps have limited disclosure requirements and are not allowed to have account discretion. Most of them receive a large commission up front on the initial sale, which means they have very little incentive to continue helping the client.

 

Some estimates claim that only 15% of advisors have a fiduciary responsibility. The Paladin Registry puts the number even lower estimating that just one in 12 advisors have fiduciary responsibility. They also state that fiduciary advisors primarily work with investors whose net worth exceeds $3,000,000.

Fiduciary Advisors are usually Registered Investment Advisors (RIA's) or Investment Advisor Representatives. These advisors are registered with the SEC or the state security division.

These are acknowledged fiduciaries that provide ongoing financial advice and services. Compensation is on a quarter by quarter basis for continued services, and it ends if the investor is dissatisfied and chooses to leave.

An advisor with fiduciary responsibilities is held to a higher ethical standard and should have the knowledge to provide sophisticated wealth management services and advice. RIA's are licensed to provide ongoing financial advice, and fiduciary advisers are required to provide disclosure in their ADV's.