The Fiduciary Difference
What a fiduciary duty requires, how the standards differ, and the incentives created by different compensation arrangements.
A fiduciary is legally required to act in your best interest, which means two specific duties rather than a general attitude. The duty of care requires advice that is researched, considered, and suited to your whole situation. The duty of loyalty requires your interests ahead of the adviser’s, with conflicts avoided where possible and disclosed plainly where they cannot be.
A doctor is the comparison people find useful. The recommendation is supposed to rest on your health, and you are not expected to audit every prescription, because a duty runs in your favor. A fiduciary standard is meant to create that same arrangement.
1 · The standards, and how they differ
Different obligations apply to different kinds of financial professionals, and the differences are specific.
| Standard | Who it applies to | What it requires |
|---|---|---|
| Fiduciary duty | Registered investment advisers, including this firm | Duties of care and loyalty, owed throughout the relationship rather than at the moment of a recommendation |
| Regulation Best Interest | Broker-dealers, since 2020 | Acting in the retail customer’s best interest when making a recommendation, through obligations covering disclosure, care, conflicts of interest, and compliance. It applies to recommendations rather than continuously, and is a separate standard from the fiduciary duty owed by advisers |
| Suitability | The historical broker standard, replaced by Regulation Best Interest | A recommendation had to be appropriate for the customer’s circumstances. Cost relative to alternatives was not part of the test |
Two differences are worth understanding. The first is timing: one standard applies throughout a relationship, the other when a recommendation is made. The second is cost. Two products can both be appropriate for the same person while differing considerably in fees, surrender charges, and what those costs come to over many years.
Titles do not settle it, since the same person can be an adviser in one capacity and a broker in another. What settles it is the capacity someone is acting in when they recommend something to you.
2 · How an adviser gets paid
Three compensation models are common, and each creates a different set of incentives.
| Model | Who pays | What the incentive is |
|---|---|---|
| Fee-only | The client directly, as a flat fee, an hourly rate, a retainer, or a percentage of assets managed | No payment from any third party. Where billing is a percentage of assets, compensation moves with the value of the portfolio; a flat, hourly, or retainer fee does not |
| Commission | Third parties, including fund companies and insurers, for selling their products | Compensation is tied to the transaction and can vary by product |
| Fee-based | Both: an advisory fee, plus commissions in some situations | Compensation comes from both sources, so both sets of incentives can be present |
Capable and conscientious advisers work within all three models. What each model does determine is which incentives exist, and a client is entitled to know which ones are present in their own arrangement.
3 · Where this firm stands
We are paid a published percentage of the assets we manage, and we operate an affiliated insurance agency, which creates a conflict we disclose.
TenBroeck Wealth Management is a registered investment adviser and owes clients a fiduciary duty. We are also affiliated through common ownership with TenBroeck Insurance Services. Where insurance is the right tool for a plan, that arrangement can pay commissions to the agency, which is compensation separate from our advisory fee and a conflict of interest.
A conflict that cannot be avoided is disclosed clearly enough that you can weigh it. So we say when insurance is being discussed, why it fits the plan if it does, how the arrangement works, and that you are free to purchase insurance anywhere. The conflict is described in our Form ADV Part 2A, and we walk through it with you.
4 · Our fee
Published, so it can be read before a meeting.
| Assets under management | Annual advisory fee |
|---|---|
| First $1,000,000 | 1.00% |
| $1,000,000 – $2,000,000 | 0.75% |
| Above $2,000,000 | 0.65% |
Annual advisory fee, billed on assets under management. The first $1,000,000 is charged at 1.00% and the next $1,000,000 at 0.75%. At $2,000,000 and above, the whole balance is charged at 0.65%. Complete and current details are in the firm’s Form ADV Part 2A, available on request.
Accounts in the firm’s wrap fee program pay this same schedule as a single fee that also covers the transaction and custody costs the custodian charges, so those are not billed to you separately. Because the firm bears those costs, the Wrap Fee Program Brochure discloses that an incentive exists to place trades less often. Clients in the program receive that brochure, which is Form ADV Part 2A, Appendix 1.
Standalone financial planning and retirement plan consulting are billed differently from the schedule above. Those arrangements are described in Form ADV Part 2A.
5 · Three questions worth asking any adviser
Three questions any adviser can answer about their own arrangement.
| Ask | What you are listening for |
|---|---|
| Are you a fiduciary, in writing, at all times? | “At all times” is the part that matters. Someone can hold the duty in one capacity and not another |
| How exactly are you paid, by me, by anyone else, or both? | An answer that covers both sources of compensation |
| What are your conflicts of interest, and how do you handle them? | Every arrangement has some. An answer that names them and says how they are handled |
For a registered investment adviser, these answers are set out in Form ADV Part 2A, which is provided on request and filed publicly.
Where this lands
A fiduciary duty is two obligations, care and loyalty, owed throughout a relationship. Regulation Best Interest is a separate standard that applies to broker-dealers when they make a recommendation. How an adviser is paid determines which incentives exist in the arrangement. Conflicts that cannot be avoided are disclosed, including ours, and our fee is published so it can be read alongside the rest.
- A fiduciary owes two duties: care, meaning researched advice suited to your situation, and loyalty, meaning your interests ahead of the adviser’s.
- That duty is owed throughout a relationship. Regulation Best Interest is a separate standard that applies to broker-dealers when they make a recommendation.
- The same person can act as an adviser in one capacity and a broker in another, so the capacity matters more than the title.
- Fee-only means the client pays directly. Commission means a third party pays. Fee-based means both.
- This firm is paid a published percentage of assets managed, and is affiliated with an insurance agency that can earn commissions, a conflict described in our Form ADV Part 2A.
- Ask any adviser: fiduciary at all times, how are you paid, and what are your conflicts.
How an independent fiduciary looks at a situation.
If it would help to talk through your own circumstances, the first conversation is just a conversation.
How we work →Educational content only. This article is for informational and educational purposes and does not constitute personalized investment, tax, or legal advice, and does not create an advisory relationship. Descriptions of advisory and broker-dealer standards, including the fiduciary duty applicable to registered investment advisers, Regulation Best Interest, and the former suitability standard, are general and simplified; the obligations that apply to any particular person depend on their registrations and the capacity in which they are acting. Nothing here characterizes the conduct of any other firm or individual. The firm and its related persons may or may not hold any security, fund, or asset class mentioned, and any such position may change at any time.
The advisory fee schedule shown is current as of publication and is subject to change. Complete and current fee details, along with the services provided in exchange, are set out in the firm’s Form ADV Part 2A, available on request. Fees are negotiable in some circumstances, and similar services may be available elsewhere for more or less.
TenBroeck Wealth Management, LLC is an investment adviser registered with the State of California (DFPI). Registration does not imply a certain level of skill or training. The firm is affiliated through common ownership with TenBroeck Insurance Services, a licensed insurance agency; the firm or its representatives may receive commissions on insurance products implemented for clients — compensation separate from advisory fees that creates a conflict of interest. Clients are under no obligation to purchase insurance through the affiliate. This and other material conflicts are described in the firm's Form ADV Part 2A, available upon request.
Written by Schad TenBroeck, CFP®, Principal. CFP Board owns the marks CFP® and CERTIFIED FINANCIAL PLANNER® in the United States.