What you need to know about the fiduciary standard and planning for retirement

There’s a better way to get investment advice.
There’s a better way to get investment advice.
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When making crucial decisions about retirement, no investor wants to feel as if they’re being fed cookie-cutter advice, or recommendations that aren’t in their best interest. When your financial future is at stake, finding the right financial advisor is critical—but can be confusing—leaving many investors feeling unsure of what to ask in order to understand a potential advisor’s strategy and motives. However, it’s critical for investors to ask smart questions of advisors—like, “are you always a fiduciary in all accounts and circumstances?”

One way to understand if you’re working with a trusted advisor is to choose an independent registered investment advisor (RIA). Independent RIAs are fiduciaries, and are legally required to act in their clients’ best interest at all times. RIAs can provide customized advice to clients with a variety of needs, and aren’t tethered to specific funds or investment products. Many advisors choose to be independent RIAs because of the freedom it gives them to focus on their clients’ priorities, establish their own business models, and act in accordance with their principles regarding wealth management. Independent RIAs have always been fiduciaries; it’s foundational to their role.

Understanding and crafting a holistic financial strategy that’s right for you starts with asking smart questions and choosing the right advisor. In that vein, here are some questions that examine the fiduciary standard and the benefits of entrusting your financial future to an RIA.

What is the fiduciary rule and why does it matter?

The fiduciary standard is not new: Congress established the Investment Advisers Act in 1940, which mandated obligatory disclosure and fraud prevention in financial advice for advisors who derive income from their services. A fiduciary duty is often considered the “highest standard of care,” meaning that a financial advisor operating under that standard would be required to recommend financial products that are the best options for their clients.

Although the fiduciary standard is considered the “highest standard of care,” depending on the types of services provided, the types of accounts served, and how they are compensated, advisors may follow the less rigorous “suitability” standard. While there has been a lot of debate over the past few years about how the fiduciary standard should be extended to encompass more circumstances, the fact remains that independent RIAs are still legally held to the fiduciary standard. This means that RIAs are required to act in their clients’ best interests, just as they always have.

Why is an RIA the right choice for me?

As knowledge of the fiduciary standard has become more widespread, clients are getting wiser about what that they should be asking of their financial advisors, demanding answers to questions such as: “How do your fees stack up against my returns?” and “Do you benefit from my investment?” The answers to these questions are essential for choosing the right advisor.

And as more advisors choose to put their clients’ financial wellbeing first, without the pressure to sell specific financial products, the RIA industry has seen dramatic levels of growth[1]. Investors are recognizing that an RIA is a smart long-term choice for several reasons: First, RIAs are committed to serving their clients—not selling them. Since investors view RIAs as trusted stewards of their money, it makes it easy to build long-term relationships, allowing advisors to comprehensively map their entire financial future. Additionally, most RIAs operate under a fee-based compensation model, allowing for a simple and transparent system of payment. To date, investors have entrusted RIAs with $5 trillion of their money.[2]

Choosing an independent RIA can be one of the most meaningful financial decisions an investor makes—and Charles Schwab has been a steadfast supporter of independent RIAs for over 30 years, providing advisors with the tools and resources they need to best serve their clients.

To learn more about this important decision, visit


today and start your search for an RIA who meets your long-term wealth management needs.

[1] Growth of RIA industry: Charles Schwab Strategy estimates May 2018

[2] Source of industry size: Charles Schwab Strategy estimates May 2018

Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading and support services of Charles Schwab & Co., Inc. (Schwab), member SIPC. Independent investment advisors are not owned by, affiliated with, or supervised by Schwab.