Quora Answer: Are Financial Advisers Fiduciaries?

The following is my answer to a Quora question: “Are all financial advisers and financial planners fiduciaries?” 

A fiduciary puts the interest of their clients before their own, in a legally binding agreement.  They are required to prevent a conflict of interest between the fiduciary and the principal.  Depending on the relationship between the financial consultant and the principal, the financial consultant may or may not be a fiduciary. 

In a legal context, a financial advisor actually refers to the legal entity, not the person.  The person is a financial consultant, or may have some other title, although the job description is essentially the same. 

In a brokerage or independent financial advisor, the financial consultant represents the client, which is an outright fiduciary arrangement.  In a tied agency agreement, the relationship is more nuanced.  The financial consultant represents the principal to the client first, although there are some fiduciary responsibilities.  This applies to financial consultants working for insurers, banks and fund houses, regardless of their title.  They are still bound by confidentiality clauses, and relating ethical guidelines.