The investment companies that are fiduciaries under federal law are firms registered as investment advisers with the U.S. Securities and Exchange Commission or a state securities regulator under the Investment Advisers Act of 1940.1eCFR. 17 CFR Part 275 Rules and Regulations, Investment Advisers Act of 1940 That category covers traditional wealth management firms, independent financial planners, and automated robo-advisor platforms. Brokerage firms, insurance agents, and banks generally are not fiduciaries when they sell investment products, even when the same parent company owns an advisory arm. You can confirm any firm’s registration for free at the SEC’s Investment Adviser Public Disclosure site, adviserinfo.sec.gov.
Which Firms Are Registered Investment Advisers
The fiduciary obligation attaches to firms registered as investment advisers (RIAs) because they charge a fee to give investment advice or manage portfolios. The common thread across the category is compensation for advice, not for executing trades or selling products. That distinction, more than the firm’s name or size, decides whether fiduciary law applies.
Large financial institutions often run advisory and brokerage businesses side by side under a single brand. Fiduciary duty follows the registered advisory entity, not the brand. A bank’s wealth management subsidiary and its retail brokerage operate under different legal standards even when the client walks through the same lobby. Sorting out which arm you’re actually dealing with is the single most important step before signing an agreement.
SEC-Registered and State-Registered Advisers
Registration jurisdiction depends on how much money the firm manages. Firms with at least $100 million in assets under management may register with the SEC, and those reaching $110 million must do so.2eCFR. 17 CFR 275.203A-1 Eligibility for SEC Registration Firms managing less than $25 million generally register with their home state. Those between $25 million and $100 million typically register at the state level, with narrow exceptions for firms based in states that don’t regulate advisers or for firms that advise registered investment companies.3U.S. Securities and Exchange Commission. Transition of Mid-Sized Investment Advisers
The fiduciary duty owed to you is identical either way. A state-registered planner running a $10 million book owes the same legal standard of care as a national firm managing billions. Registration level determines the regulator, not the standard.
Fee-Only and Fee-Based Firms
A fee-only adviser is paid solely by clients, usually through a percentage of assets under management, a flat fee, or an hourly rate. A fee-based adviser also collects client fees but earns commissions from insurance policies, mutual fund shares, or other product sales. Both models can be registered investment advisers and therefore fiduciaries. The difference is structural: a fee-only firm has fewer built-in conflicts, while a fee-based firm must disclose the conflicts its commission stream creates and still meet its fiduciary duties while managing them.
Who Is Not a Fiduciary by Default
Broker-dealers, and the registered representatives they employ, operate under Regulation Best Interest (Reg BI) rather than the fiduciary standard. Reg BI requires a broker to act in the retail customer’s best interest at the time a recommendation is made and to avoid putting the broker’s financial interest ahead of the customer’s.4eCFR. 17 CFR 240.15l-1 Regulation Best Interest The language echoes fiduciary duty, but two gaps matter.
A fiduciary investment adviser owes an ongoing duty to monitor your portfolio through the life of the relationship. A broker under Reg BI generally has no monitoring obligation once the recommendation is made, unless a separate contract creates one. When material conflicts arise, a fiduciary must eliminate the conflict or fully disclose it; a broker must mitigate or eliminate it, which in practice allows the conflict to continue as long as internal policies address it.5Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers
Many firms are dual registrants, meaning they hold both broker-dealer and investment adviser registrations. When a dual registrant provides advisory services, it acts as a fiduciary. When it executes a trade recommendation through the brokerage side, Reg BI may apply instead. The SEC has told firms to clearly disclose which capacity they’re acting in during any given interaction.6U.S. Securities and Exchange Commission. Staff Bulletin: Standards of Conduct for Broker-Dealers and Investment Advisers Conflicts of Interest The question with a dual registrant isn’t whether fiduciary duty exists somewhere in the business; it’s whether the firm is acting as a fiduciary in your specific engagement.
Fiduciaries Inside Employer Retirement Plans
If your investments sit inside an employer-sponsored plan such as a 401(k), a separate law governs. The Employee Retirement Income Security Act (ERISA) defines fiduciaries by conduct rather than title. A person who gives individualized investment advice to a plan for compensation, on a regular basis, with the understanding that the advice will serve as a primary basis for investment decisions, can be an ERISA fiduciary.7eCFR. 29 CFR 2510.3-21 Definition of Fiduciary
The Department of Labor’s 2024 Retirement Security Rule would have widened this definition to reach more retirement-related advice, including one-time rollover recommendations. A federal court in Texas blocked the rule with a nationwide injunction in July 2024, and the DOL later dropped its appeal. The older, narrower definition still controls. Practically, the person managing your 401(k) investment lineup is almost certainly an ERISA fiduciary, but a broker who recommends rolling that 401(k) into an IRA may not be.
What the Fiduciary Duty Requires
The SEC’s 2019 interpretation frames the standard as two duties: a duty of care and a duty of loyalty.5Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers
The duty of care requires the adviser to understand your financial situation, experience, and goals before making any recommendation, and to independently investigate an investment before putting you into it rather than relying on marketing materials. Care also extends over time: the adviser must monitor your portfolio with enough regularity to catch a deteriorating fund, a shift in risk exposure, or a change in conditions that affects your holdings. This ongoing obligation is one of the clearest lines separating the fiduciary standard from Reg BI.
The duty of loyalty means the adviser cannot place its own interests ahead of yours. Referral fees, revenue sharing from fund companies, or any other financial benefit tied to a specific recommendation must be fully and fairly disclosed. Disclosure alone doesn’t authorize an inferior recommendation; it lets you see the conflict and judge whether the advice still holds up.
Federal law also flatly prohibits certain conduct. An adviser cannot defraud a client, and cannot buy securities from or sell securities to a client out of the adviser’s own account (a “principal trade”) without written disclosure and the client’s consent beforehand.8Office of the Law Revision Counsel. 15 USC 80b-6 Prohibited Transactions by Investment Advisers Violations can be established through negligence; the SEC does not need to prove deliberate intent.
How to Verify a Firm Is a Fiduciary
Two free public databases let you confirm registration status. Between them, you can see whether a firm is a registered investment adviser, a broker-dealer, both, or neither.
Investment Adviser Public Disclosure (IAPD)
IAPD, at adviserinfo.sec.gov, is the central record for investment adviser registrations at both federal and state levels.9Investment Adviser Public Disclosure. IAPD Homepage To use it:
- Select the “Firm” tab rather than “Individual.”
- Enter the firm name, or the CRD or SEC file number if you have it. The CRD (Central Registration Depository) number uniquely identifies a firm and avoids confusion with similarly named entities.
- Choose the result marked as an Investment Adviser Firm. Multiple listings may appear if the firm also holds a brokerage registration.
- Check that registration status reads “Approved” or “Effective.” Anything else suggests the firm may not currently be authorized to provide advisory services.
- Open the linked Form ADV filings. Part 2 is a plain-English brochure describing the firm’s fee structure, strategies, and conflicts of interest. Part 1 lists ownership, personnel, and any disciplinary history.10U.S. Securities and Exchange Commission. Form ADV
A “successor” filing in the results means the firm has been through a merger or reorganization; follow the successor link to reach the current entity’s records.
Form CRS
Every registered investment adviser and broker-dealer that serves retail clients must give you a short Form CRS relationship summary before opening an account or making a first recommendation.11U.S. Securities and Exchange Commission. Form ADV Part 3 Instructions to Form CRS Investment advisers are required to include the line: “When we act as your investment adviser, we have to act in your best interest and not put our interest ahead of yours.” Broker-dealers use different required language reflecting Reg BI. A dual registrant discloses both roles on the same document. Reading Form CRS before signing anything is the fastest way to confirm which legal standard applies to the advice you’ll receive.
FINRA BrokerCheck
BrokerCheck, at brokercheck.finra.org, shows whether a person or firm is registered to sell securities, give investment advice, or both.12Financial Industry Regulatory Authority. BrokerCheck – Find a Broker, Investment or Financial Advisor It’s the better tool for looking up an individual representative, and it reports employment history, licensing, regulatory actions, and investment-related complaints and arbitrations. If your financial professional shows only a broker-dealer registration and no investment adviser representative status, they’re working under Reg BI rather than a fiduciary standard.
If You Believe a Fiduciary Has Failed You
You have more than one route to recourse when a registered investment adviser breaches its duty.
The SEC accepts tips, complaints, and referrals through an online portal at sec.gov. The form allows anonymous submissions through an attorney, and it times out after 60 minutes of inactivity, so gather your documents first.13U.S. Securities and Exchange Commission. Welcome to Tips, Complaints, and Referrals SEC complaints can prompt investigations and enforcement, but they don’t directly compensate investors.
For disputes with firms that are also FINRA members, FINRA arbitration is generally the required forum for claims arising from the firm’s FINRA-regulated activities, and it can produce direct monetary awards. For advisers that aren’t FINRA members, your state securities regulator or civil litigation may be the path.14FINRA. Guidance on Disputes Between Investors and Investment Advisers That Are Not FINRA Members
Gather supporting records before filing: account statements, correspondence, the firm’s Form ADV (especially conflict disclosures), and anything showing how the advice diverged from your situation. Investment advisers must keep client communications, recommendations, and transaction records for at least five years, with the first two maintained in an accessible office.15eCFR. 17 CFR 275.204-2 Books and Records to Be Maintained by Investment Advisers If the firm can’t produce records it was required to keep, that failure becomes part of the complaint.