What is a fee-only fiduciary?
A fee-only fiduciary is a financial advisor who is legally required to act in your best interest and who earns money only from the fees you pay directly. No commissions. No kickbacks. No hidden incentives to recommend one product over another.
This combination matters more than most people realize. The financial advice industry includes many types of professionals operating under very different rules. Some must put your interests first. Others only need to recommend something “suitable.” And some operate with almost no regulatory oversight at all.
Understanding these distinctions can save you from conflicts of interest you never knew existed.
Why fiduciary duty matters
Fiduciary duty is a legal obligation, not a marketing phrase. When an advisor operates as a fiduciary, they are legally bound to:
- Put your interests ahead of their own
- Disclose any conflicts of interest
- Provide advice with care, skill, and diligence
- Avoid misleading statements
This standard comes from the Investment Advisers Act of 1940 and has been reinforced by SEC guidance over the decades. If a fiduciary violates these duties, they face legal consequences.
Not every financial professional operates under this standard. Many work under what’s called the “suitability standard,” which only requires that recommendations be appropriate for your situation. A suitable recommendation can still be one that pays the advisor a higher commission or benefits their firm more than it benefits you.
The difference is subtle in language but significant in practice.
What “fee-only” means
Fee-only means exactly what it sounds like: the advisor’s only compensation comes from fees paid directly by clients, typically as a percentage of assets under management.
What fee-only advisors don’t receive: commissions from selling products, referral fees from insurance companies, revenue sharing from mutual fund providers, or any other compensation that could create a conflict of interest.
This matters because incentives shape behavior. An advisor who earns a commission for selling you a particular annuity has a reason to recommend that annuity whether or not it’s the best choice for you. A fee-only advisor has no such incentive.
How advisor standards compare
The financial advice industry includes professionals operating under very different standards. Here’s how they compare:
| Suitability standard | Basic fiduciary | Fee-only fiduciary | |
|---|---|---|---|
| Legal standard | Must be “suitable” | Must act in your best interest | Must act in your best interest |
| Compensation | Commissions, fees, or both | Client fees plus commissions or referral fees | Client fees only |
| Conflicts of interest | Must only disclose some conflicts | Must disclose conflicts | Fewest structural conflicts |
| Examples* | Banks, broker-dealers, insurance companies | Registered investment adviser firms |  |
| * Insurance companies selling insurance products may operate under no fiduciary or suitability standard at all. Magnifina is one among other fee-only registered investment adviser firms. | |||
Both basic fiduciaries and fee-only fiduciaries share the same legal obligation to act in your best interest. The difference is in compensation structure. A basic fiduciary can still earn commissions or referral fees that create conflicts, even while meeting their fiduciary duty. A fee-only fiduciary removes those conflicts entirely by accepting compensation only from clients.
Are we right for you?
Take our brief survey to learn if our advisory services are the best match for your financial goals and situation, and see if we should move forward together.
Ready for the first step?
Schedule a no-cost consultation to discuss your financial goals and explore how we can help you build a personalized investment strategy.
Advisors who are not fiduciaries
The title “financial planner” isn’t regulated. Anyone can use it. Without a registration as an investment adviser, a financial planner likely has no legal fiduciary obligation to you. The same is true for many other professional-sounding titles in the financial industry.
Broker-dealers and registered representatives work under the suitability standard. They can recommend products that benefit them financially as long as those products aren’t clearly inappropriate for your situation. Most advisors at large wirehouses and banks fall into this category.
Insurance agents selling annuities, whole life insurance, or other insurance products typically have no fiduciary duty. Their obligation is to the insurance company, not to you. Some states have begun requiring a “best interest” standard for annuity sales, but this is not equivalent to full fiduciary duty.
Financial coaches, social media influencers, and self-styled “wealth consultants” often operate with no regulatory oversight at all. They can offer opinions and guidance without any legal standard governing the quality or appropriateness of their advice.
The common thread: none of these professionals are legally required to put your interests first. Some may still give good advice, but the structure doesn’t guarantee it.
How to verify an advisor’s fiduciary status
Don’t take anyone’s word for it. You can verify an advisor’s registration and compensation structure yourself in two steps.
Step 1: Confirm fiduciary status
Visit the SEC’s Investment Adviser Public Disclosure database at adviserinfo.sec.gov and search for the firm or individual. If they appear as a registered investment adviser, they have a fiduciary duty to clients.
If someone appears in FINRA’s BrokerCheck database at brokercheck.finra.org but not as a registered investment adviser, they likely operate under the suitability standard. Advisors who appear in both databases are dual-registered and may switch between standards depending on the transaction.
Step 2: Confirm fee-only compensation
Once you’ve confirmed fiduciary status, check the advisor’s Form ADV Part 2A to verify they’re fee-only. This document is available through the SEC database. Look for:
- Item 5 (Fees and Compensation): A fee-only advisor’s disclosure will show only client-paid fees.
- Item 10 (Other Financial Industry Activities): This shows whether the advisor or firm has relationships with broker-dealers or insurance companies that could create conflicts.
- Item 14 (Client Referrals and Other Compensation): This discloses any referral fees or revenue-sharing arrangements. For a fee-only advisor, this section should show none.
If an advisor claims to be fee-only but their ADV shows commission income or third-party payments, something doesn’t add up.
Why Magnifina qualifies as a fee-only fiduciary
Magnifina is a registered investment adviser with the SEC. We operate exclusively under the fee-only fiduciary model.
This means:
- We are legally obligated to act in your best interest
- Our only compensation comes from fees you pay directly
- We don’t receive commissions, referral fees, or any third-party compensation
- Our Form ADV is publicly available for anyone to verify
We chose this structure deliberately. It removes the conflicts of interest that complicate advice at many financial firms and lets us focus entirely on what’s best for you.
You can verify our registration and review our Form ADV through the SEC’s Investment Adviser Public Disclosure database at adviserinfo.sec.gov.
Finding an advisor who works for you
The fee-only fiduciary standard represents the highest level of legal protection and alignment available when working with a financial advisor. It doesn’t guarantee good advice—that depends on the advisor’s skill and judgment—but it does ensure the advice isn’t compromised by hidden incentives.
When evaluating any financial professional, ask two questions:
- Are you a registered investment adviser with a fiduciary duty to me?
- Are you fee-only, and can I verify that in your Form ADV?
The answers tell you what standard they operate under and whose interests shape their recommendations.
Common questions
What's the difference between fee-only and fee-based?
These terms sound almost identical, which is no accident. The distinction matters.
Fee-only advisors receive compensation exclusively from client fees. No commissions, no referral fees, no third-party payments of any kind.
Fee-based advisors charge fees but can also earn commissions, referral fees, or other compensation from third parties. A fee-based advisor might charge you a planning fee and also receive a commission for selling you an insurance product.
In our comparison table above, we call fee-based advisors “basic fiduciaries” to avoid confusion with fee-only. Both meet the legal definition of a fiduciary, but fee-based advisors have compensation structures that can create conflicts fee-only advisors avoid entirely.
When an advisor describes themselves as “fee-based,” ask what other forms of compensation they receive.
Are insurance agents fiduciaries?
Generally, no. Insurance agents typically have no fiduciary duty to you. Their primary obligation is to the insurance company they represent.
Some states have adopted regulations requiring a “best interest” standard for annuity sales, but this is weaker than full fiduciary duty and only applies to specific products. If you’re working with an insurance agent, assume they are not a fiduciary unless you can verify otherwise.
Can someone be a fiduciary sometimes but not always?
Yes, and this is common. Dual-registered advisors hold both an investment adviser registration (fiduciary) and a broker-dealer registration (suitability standard). They can switch between standards depending on the type of transaction.
This creates confusion. The same person might give you fiduciary advice on your investment portfolio and then sell you an annuity under the suitability standard in the same meeting. Ask your advisor whether they act as a fiduciary for all recommendations, not just some.
Does a CFP designation mean someone is a fiduciary?
The CFP Board requires its certificants to act as fiduciaries when providing financial advice. However, this is a professional and ethical standard enforced by the CFP Board, not a legal obligation enforced by government regulators.
If a CFP professional violates this standard, they risk losing their certification. That’s a meaningful consequence, but it’s different from the legal liability a registered investment adviser faces for breaching fiduciary duty.
A CFP designation signals commitment to ethical standards, but it doesn’t replace regulatory fiduciary status. Verify your advisor’s registration with the SEC or state regulators to confirm their legal obligations.
Get insights delivered to your inbox and never miss our latest research and key developments. Our monthly roundup includes analysis, updates, and other resources for serious investors.
