Fiduciary RIA vs. broker under Reg BI: not the same standard.
Both call themselves 'advisor,' but the legal duty, conflicts allowed, and compensation models are different. This is the single most important distinction to understand before you hire someone.
| Feature | Fiduciary RIA | Broker-Dealer (Reg BI) |
|---|---|---|
| Legal standard | 1940 Act fiduciary — at all times | Reg BI — best interest at moment of recommendation |
| Ongoing duty | Yes — continuous fiduciary obligation | Transactional — applies per recommendation |
| Conflicts of interest | Must avoid or eliminate where possible | Allowed if disclosed and mitigated |
| Proprietary products | None (fee-only RIAs) | Common — house funds, structured notes, annuities |
| Compensation | Fee-only or flat fee | Commissions, 12b-1, revenue sharing, fees |
| Disclosure document | Form ADV Parts 1, 2A, 2B | Form CRS + BrokerCheck |
| Regulator | SEC or state securities regulator | FINRA + SEC |
| Title in marketing | Investment Adviser, RIA | Often 'Financial Advisor' (no legal meaning) |
| Account custodian | Independent (Schwab, Fidelity, etc.) | Usually the broker-dealer's own platform |
| Accountability for advice | Civil fiduciary liability | Suitability + Reg BI standard |
Common questions about this comparison
Aren't all financial advisors fiduciaries now?
No. Registered Investment Advisers (RIAs) operate under the 1940 Act fiduciary standard at all times. Broker-dealers and most wirehouse advisors operate under Regulation Best Interest (Reg BI), which is a lower standard with disclosure-based exceptions.
What is Reg BI exactly?
Adopted in 2020, Regulation Best Interest requires broker-dealers to act in the customer's 'best interest' at the moment of recommendation, but allows conflicts of interest if disclosed. It does not require ongoing fiduciary duty or fee-only structure.
Does CFP® mean fiduciary?
CFP® holders agree to a fiduciary duty when providing financial planning services per CFP Board standards — but the firm's regulatory model still controls the relationship. A CFP® at a broker-dealer is held to Reg BI for brokerage transactions.
Why does this matter for me?
It changes who must put your interests first by law, what conflicts must be eliminated vs. merely disclosed, and what compensation models are allowed (commissions, revenue sharing, proprietary product credits).
How can I tell which I have?
Ask: 'Are you a fiduciary 100% of the time and on every interaction we have?' Then read the Form ADV (RIA) or Form CRS (broker-dealer). Compensation type — fee-only, fee-based, or commission — is also a strong signal.