Definition of Fiduciary
THE DEFINITION OF FIDUCIARY
The Board of Directors, Representatives, and Financial Advisors comprising NAPFA have adopted the following definition of Fiduciary:
fi•du•ci•ar•y – A financial advisor held to a Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a Fiduciary, the financial advisor is required to act with undivided loyalty to the client. This includes disclosure of how the financial advisor is to be compensated and any corresponding conflicts of interest.
NAPFA believes advisors must receive compensation only from their clients, must disclose any possible conflicts of interest, and must be loyal to the best interests of their clients.
• Compensation – NAPFA members are compensated solely by their clients, and do not receive any outside inducements for recommending investments or financial products. This is the true definition of being a “Fee-Only Advisor.”
• Loyalty – An advisor who is loyal to only his or her clients will not be swayed by outside forces to recommend investments with higher commissions or payouts.
• Disclosure – People must understand how their financial advisor is being compensated and whether or not any potential conflicts may impede an advisor’s ability to provide truly independent advice. Disclosure must be made before a client works with an advisor or implements any of his or her advice.