Education · Pillar
Fiduciary duty in investment advisory
Published 2026-05-12 · Educational content; not investment advice.
"Fiduciary" is one of the most-used and most-misunderstood words in financial services. This page lays out what the fiduciary standard actually requires of a Registered Investment Advisor under U.S. federal law, how it differs from the standards that apply to broker-dealers and insurance agents, and how Tandem Private Wealth LLC plans to operate under it once registration becomes effective.
The legal source of the duty
The fiduciary duty that applies to Registered Investment Advisors derives from the Investment Advisers Act of 1940 and from decades of Securities and Exchange Commission interpretation. In 2019 the SEC published a formal interpretation (Release No. IA-5248) reaffirming that the duty has two components: a duty of care and a duty of loyalty. Both components apply for the duration of the advisory relationship.
Duty of care
The duty of care requires an advisor to:
- Provide advice that is in the best interest of the client, taking into account the client's objectives, circumstances, and constraints.
- Seek best execution of client transactions.
- Provide advice and monitoring over the course of the relationship that is consistent with the agreed scope.
"Best interest" is not "best outcome" — it is a process standard, grounded in reasonable diligence and the information that was available when the recommendation was made.
Duty of loyalty
The duty of loyalty requires an advisor to eliminate, or to make full and fair disclosure of, all conflicts of interest such that the client can provide informed consent. A conflict of interest is any situation in which the advisor has an incentive to render advice that is not disinterested. Common examples include:
- Compensation that varies based on the products or share classes recommended.
- Revenue-sharing arrangements with custodians, fund companies, or other service providers.
- Affiliations with broker-dealers, insurance agencies, or other parties that may earn fees from the advice.
- Personal trading in the same securities recommended to clients.
Conflicts are not, by themselves, prohibited. What is required is that they be disclosed clearly enough that the client can decide whether to consent.
How the standard differs from suitability and Regulation Best Interest
Broker-dealers historically operated under the FINRA suitability rule (Rule 2111), which required only that a recommendation be suitable in light of a customer's profile. Regulation Best Interest (Reg BI), effective June 2020, raised the bar for broker-dealer recommendations — but it did not import the full fiduciary framework. Reg BI is recommendation-specific; the RIA fiduciary duty is ongoing and relationship-wide.
Many practitioners hold both an investment-advisor representative registration and a broker-dealer registration ("dual registrants"). Which standard applies in a given conversation depends on which hat the practitioner is wearing — a useful question to ask in writing whenever the answer is unclear.
How Tandem Private Wealth plans to operate
Tandem Private Wealth LLC is currently in formation; California RIA registration is pending, with effectiveness expected Q3 2026. Once registration is effective, the firm will operate as a fee-only Registered Investment Advisor, subject to the fiduciary duty described on this page. The firm's planned conflict-management posture includes:
- Fee-only compensation; no product commissions; no revenue sharing.
- A single, transparent, marginal-tiered AUM fee schedule (see About).
- Full Form ADV Part 2A disclosure of any material conflicts at the point of registration and thereafter.
- A written Code of Ethics governing personal trading by the firm and its representatives.
Until registration is effective, the firm does not provide investment advisory services and the fiduciary standard is not yet a matter of law as applied to it. This page is published as educational content only.
Frequently asked questions
What is the fiduciary standard for an investment advisor?
A fiduciary standard is a legal duty to place the client's interests ahead of the advisor's own. For Registered Investment Advisors under the Investment Advisers Act of 1940, the fiduciary duty has two components: a duty of care (to provide advice that is in the client's best interest given the client's circumstances) and a duty of loyalty (to avoid or fairly disclose conflicts of interest). The SEC's 2019 interpretation reaffirmed both components and clarified that the duty applies for the duration of the advisory relationship.
How is fiduciary duty different from suitability or Regulation Best Interest?
The broker-dealer suitability standard (FINRA Rule 2111) historically required only that a recommendation be suitable for the client given the client's profile, even if a better option existed. Regulation Best Interest (Reg BI), effective June 2020, raised that bar but did not equate it to a fiduciary standard: Reg BI applies to specific recommendations and does not impose an ongoing duty of loyalty across the entire relationship. The RIA fiduciary duty is broader and ongoing.
Does fiduciary duty mean an advisor cannot make mistakes?
No. Fiduciary duty is a duty of process and loyalty, not a guarantee of outcomes. A fiduciary can still recommend an investment that loses money. What fiduciary duty requires is that the recommendation be made in the client's interest, supported by reasonable diligence, and with material conflicts of interest avoided or disclosed.
Do all financial advisors have a fiduciary duty?
No. Registered Investment Advisors (and their representatives) have an ongoing fiduciary duty under the Advisers Act. Broker-dealers operate under Regulation Best Interest, which is recommendation-specific rather than relationship-wide. Insurance agents operate under state-law standards that vary. Many practitioners hold multiple registrations and the duty that applies depends on the hat they are wearing in a given interaction — which is part of why disclosure of registration status matters.
How will Tandem Private Wealth operate under the fiduciary standard?
Upon registration effective with the California Department of Financial Protection and Innovation, Tandem Private Wealth LLC will operate as a Registered Investment Advisor subject to the fiduciary duty described above. The firm plans to operate fee-only (no product commissions, no revenue sharing), with a published fee schedule, and with all material conflicts of interest disclosed in Form ADV Part 2A. Pre-registration, the duty is in formation; it becomes a matter of law once registration is effective.