You may have heard the word "fiduciary" when reading about or searching for a financial advisor. This is an important term to understand, so we'll break it down in this article, and discuss why it's so important to work with a fiduciary. But first, the dictionary definition is that a fiduciary is an individual or organization that has a legal duty of care and loyalty to another person (or persons).\r\n\r\nA fiduciary who manages money for another person is expected to act with the utmost honesty and integrity, making decisions that are in that person\u2019s best interests. Bankers, attorneys, money managers, financial advisors, accountants, executors, board members, and corporate officers should have fiduciary responsibility. If they are and it can be proven they haven\u2019t acted in the best interest of their customers, clients or shareholders, they can be held legally liable.\r\nWhat is Expected of a Fiduciary?\r\nWhen searching for a financial advisor, look for a fiduciary. Trust is crucially important in a relationship, and you deserve an advisor who is transparent and minimizes conflicts.\r\n\r\nFiduciary financial advisors must:\r\n\r\n \tPut your best interests before their own, seeking the best prices and terms.\r\n \tAct in good faith and provide you with all relevant facts.\r\n \tAvoid conflicts of interests and disclose any potential conflicts of interest.\r\n \tDo their best to ensure the advice they provide is accurate and thorough.\r\n \tAvoid using your assets purely to benefit themselves, such as by purchasing securities for their own account before buying them for you.\r\n\r\nUnderstanding Fiduciary Duties\r\nA fiduciary's responsibilities are both ethical and legal. When a party knowingly accepts the fiduciary duty, they are required to act in the best interest of the principal, the party whose assets they are representing. If someone has a fiduciary duty to you, he or she must act first and foremost in your financial interests. A fiduciary cannot recommend an investment that doesn\u2019t benefit you or carries higher fees than a virtually identical investment.\r\n\r\nOn the contrary, non-fiduciaries may consider their own interests alongside yours and recommend investments that pay them the largest commissions -- as long as the investment is considered generally suitable for your needs.\r\n\r\nRecourse is another important consideration. If a fiduciary violates his or her duty, you have an avenue for legal action. If a non-fiduciary advisor knowingly sells you high-fee or inappropriate investments, you\u2019ll face much greater difficulty proving legal wrongdoing.\r\n\r\nHere are common examples of breaches of fiduciary duty:\r\n\r\n \tActing negligently\r\n \tMaking unauthorized trades\r\n \tAccount churning (making an excessive trades to generate commissions)\r\n \tMisrepresentation (making a false statement about a security transaction)\r\n\r\nHow Do You Know if Your Financial Advisor is a Fiduciary?\r\nVet candidates carefully. Get to know any financial advisors you are considering and ask questions to ensure they are suitable for your needs. Here are good questions to ask.\r\n\r\n1. Are You a Fiduciary?\r\nOnly financial advisors who are fiduciaries are required by law to act in the best interests of their clients, both on retirement and other investment accounts.\r\n\r\nDo You Have an Adequate Investment in Technology?\r\nMany registered investment advisors (RIAs) haven't made adequate investment in technology, such as basic financial planning advisors. You should seek an independent RIA who has the software to provide a transparent view of your entire financial life. Otherwise, how would he or she be able to provide you with holistic financial advice?\r\n\r\nHow are you compensated?\r\nIt can be tough to find out how an advisor or broker is compensated. Brokers can be incentivized by mutual fund incentives, lending products, and trading commissions. These costs are often buried in fine print, but they can really add up if you\u2019re not careful.\r\n\r\nPersonal Capital was built around the fiduciary standard. We are \u2013 and always will be \u2013 a fiduciary for our clients. We promise to provide advice that is in our clients\u2019 best interest, and because we are a Registered Investment Advisor (RIA), it is our legal obligation, as well.\r\n\r\nWhy It\u2019s Important to Choose a Fiduciary Financial Advisor\r\nA fiduciary advisor can give you greater peace of mind with your money. You\u2019ll know they\u2019re legally obligated to act in your best interests. By removing the incentives that underlie far too many high-fee and other proprietary products, and bypassing the people who push them, you\u2019re more likely to end up with a strategy that is truly right for you.\r\n\r\nWork with a Personal Capital Advisor\r\nSince inception, Personal Capital has acted as a fiduciary. As a Registered Investment Advisor, we not only follow the fiduciary standard but embrace it as part of our mission to provide financial advice. 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