Why You Need To Work With A True Fiduciary Financial Advisor

Image of Ryan A. Hughes
Ryan A. Hughes
March 17, 2022
Why Work With A True Fiduciary Advisor

Is there a difference between a financial advisor, a financial consultant, and a wealth manager? What about a financial planner, a registered representative, and an investment advisor representative? Do these titles really help the average investor distinguish between proficiency and job function?

The answer is, unfortunately, no. These titles do nothing more than to self-designate supposed capabilities. Just because a financial advisor holds the CFP (Certified Financial Planner) designation does not mean that individual will always act as a fiduciary. Instead, determining which official laws and regulations an advisor operate under is the more important question to answer.

Making it worse, there are a lot of “financial advisors” in the U.S., 687,031 to be precise (FINRA, 2021), and the vast majority of them are not required to place your interests before their own. So how do we know which advisors are here to help and which are here to sell a product? Keep reading to learn more about what to look for when you begin researching San Diego Financial Advisors.

Types of Financial Advisors: Why you should work with a Fiduciary Advisor

There are three (3) types of financial advisors out there: 

  • Brokers
  • Fiduciary Advisors
  • Dual-Registered Advisors

They are all different, and most have different incentives. All investors need to know these differences.


A broker is a financial advisor that works for a broker/dealer, an insurance firm, or both. They are paid a commission or a fee for selling products to their clients. Most of the financial household names are broker/dealer firms, including Merrill Lynch, Edward Jones, Morgan Stanley, Ameriprise, etc. 90% of all financial advisors in the U.S. are brokers. What is disturbing about this is that brokers don’t have to recommend the best product for their clients. They only have to provide a suitable product to their clients, not what they think is best. By law, brokers only have to adhere to the suitability requirement, which is a very low bar to clear.

Source: ft.com

To be clear, I’m not suggesting that all broker/dealer financial advisors are Jordan Belfort’s or Gordon Gekko’s in hiding. In fact, most financial advisors that work at these firms are good decent people. I worked at some of the largest and most well-known broker/dealers globally, and I can tell you from experience: most financial advisors aim to do well for their clients. However, brokers have a significant conflict of interest: they get paid by selling financial products to their clients.

It is one thing to trust somebody, and it is another to trust their incentives. History proves that it is wiser to follow the latter. A broker’s motive is to sell high-paying products to their clients. They will earn more by recommending certain products over others. If a broker had to choose between an actively managed mutual fund with high fees and a passively managed ETF with low fees, they would almost always choose the higher fee option.

Fiduciary Advisors

Now, this is where it gets a bit confusing. Of the 687,031 financial advisors in the U.S., 369,095 (53.7%) of them work for a Registered Investment Advisor (RIA) firm. This math doesn’t jive with the figures above because, technically, both Independent Advisors (10.1%) and Dually Registered Advisors (43.6%) both operate under an RIA firm. There is a significant distinction between the two, which I will address in the next section.

While there are many options for San Diego financial services, RIAs are required by law to place their client’s interests before their own, which is known as the fiduciary standard. Bull Oak Capital, of course, is an RIA firm. This fiduciary requirement is the highest standard in the financial services industry. It is so onerous; we have to disclose any potential conflict of interest and potential risks to the public.

“In translating fiduciary principles into application, an RIA is required to implement certain practices and procedures to ensure conformance to the law. At the heart of conformance is the registration form (ADV Parts I and II) that financial advisors must file with the SEC. It is ADV Part II; in which the advisor must disclose all material information a client needs to make an informed decision about the advisory relationship or a specific transaction.”


The information and disclosures required include:

  • All material facts of any instance in which a conflict of interest may exist; past, present, or future
  • Any type of arrangement or relationship the advisor has that could present a conflict of interest, including participation or an interest in any client transaction
  • All material risks involved with methods of analysis used in determining suitability
  • Any unusual risk involved in a specific investment strategy or security

This detailed information must then be compiled into a client brochure and written in clear language in a specified format, so investors may compare one firm to another as apples-to-apples.

Dual-Registered Advisors

If you were to choose between working with a broker and working with an RIA advisor, the choice is pretty clear, right? Perhaps, not quite so. Now, here is a rather well-kept secret within the industry. Most of the independent fiduciary advisors in the industry are not fiduciaries 100% of the time. These advisors are Dual Registered Advisors. Dual-Registered Advisors are financial advisors registered as a broker (under a broker/dealer), AND they are registered as an RIA.

Wolf in Sheep's Clothing

So, what does this mean? This means that they can claim to be a fiduciary independent advisor on one hand and sell products for a commission as a broker on the other. It’s a shady business. A lot of these types of advisors are a wolf in sheep’s clothing. These advisors can earn a client’s trust by telling them they are fiduciaries and obligated to place their interests before their own. Then, they can switch hats and sell them financial products for a commission. And, unfortunately, the vast majority of independent advisors are structured this way.

Are CFP Advisors Fiduciaries All The Time?

No, most CFPs (Certified Financial Planner) are not fiduciaries all of the time. In fact, the vast majority of CFPs are brokers, collecting commissions. In my opinion, if a Certified Financial Planner collects a commission, they have a major conflict of interest and they should not be considered as a true fiduciary.

Keep in mind that the CFP designation is beholden only to itself. The CFP Board is a self-regulating organization whose members do not face any legal ramifications if an individual breaches the fiduciary veil. Rather, if a member does not uphold the CFP code of conduct, they only risk losing their CFP credential and membership.

True Independent Fiduciary Advisors

Of the 369,095 Registered Investment Advisors (RIA) in the U.S., 299,613 of them are Dual-Registered Advisors. This means that only 69,482 RIAs are true fiduciary investment advisors without this huge conflict of interest. This represents only 10.1% of the 687,031 financial advisors in the U.S. Ryan A. Hughes (me) with Bull Oak Capital, of course, is one of these individuals.

So, how can one tell if their fiduciary advisor is dully registered or not? For one, brokers are registered with FINRA, and RIAs are registered under the SEC. A simple test is to see if they are registered under both. By checking out FINRA’s Brokercheck, you see if your advisor is registered as a broker, an independent advisor, or both. By searching any broker/advisor’s name, you can easily find out whether or not that individual is a broker or not. For example, you can see my filings on the SEC website, which states, “Previously Registered Broker.”

Ryan A Hughes Broker Check

If you have any questions when looking for a true fiduciary financial advisor in San Diego, please do not hesitate to contact us with any questions.

Recent Blog Posts

Panic Selling
How Mega Backdoor Roth IRAs Work
Asset Location Strategy
tax loss harvesting ultimate guide cover image