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The Million-Dollar Question You Should Be Asking

Here's a question that could literally save you hundreds of thousands of dollars over your lifetime: Is your financial advisor legally required to act in your best interest?

If you're working with a broker at a major national firm, the answer might surprise you, and not in a good way.

The distinction between "brokers" and "fiduciaries" isn't just industry jargon. It's the difference between an advisor who can recommend products that benefit them over you and one who must put your interests first. And that difference shows up in your account balance, your retirement timeline, and your family's financial security.

At Davies Wealth Management, we've seen countless clients come to us after years of working with big-box brokerages, often shocked to learn how much the suitability standard has cost them. Let's break down exactly what's happening behind the scenes.

Suitability vs. Fiduciary: What's the Real Difference?

Think of it this way: if you walked into a car dealership looking for a reliable family vehicle, a salesperson operating under a "suitability" standard could sell you any car that technically meets your basic needs, even if it's the model with the highest commission or the one the dealership desperately needs to move off the lot.

A fiduciary, on the other hand, would be legally obligated to recommend the best car for your specific situation, budget, and goals, regardless of what they personally earn from the sale.

Two distinct financial paths: one leading to fiduciary trust and clarity, the other to complex broker decisions.

The Suitability Standard

Broker-dealers at national firms operate under the "suitability standard" set by the Financial Industry Regulatory Authority (FINRA). Under this standard, they only need to recommend products that are reasonable for your situation. Key points:

  • No requirement to disclose conflicts of interest
  • Can recommend products that pay them higher commissions
  • No obligation to find you the best option, just an acceptable one
  • Income often tied to transaction volume, not your success

The Fiduciary Standard

Registered Investment Advisors (RIAs) like Davies Wealth Management operate under the fiduciary standard, which is significantly more stringent:

  • Legally required to put your interests above their own
  • Must disclose all potential conflicts of interest
  • Obligated to recommend the best available option for you
  • Often operate on fee-only structures, aligning incentives with your success

This isn't a subtle difference. It's a fundamentally different business model and legal obligation.

The Hidden Costs of the Suitability Standard

So what does the suitability standard actually cost you in dollars and cents? The answer is often staggering.

1. Suboptimal Product Selection

Here's a scenario that plays out every day at national brokerages: Two mutual funds have nearly identical performance and risk profiles. Fund A has lower expense ratios and no load fees. Fund B pays the broker a nice commission.

Under the suitability standard, the broker can legally recommend Fund B. They're not breaking any rules. But over 20 or 30 years, that higher expense ratio could cost you tens of thousands of dollars in lost growth.

2. Undisclosed Conflicts of Interest

Many investors don't realize that their broker might be limited to selling only products available on their firm's proprietary platform, even when better options exist elsewhere. That's not disclosed, and under suitability rules, it doesn't have to be.

Side-by-side comparison of organized and disordered documents, highlighting clarity versus hidden broker costs.

3. Commission-Driven Recommendations

When a broker's income is tied to the transactions they execute, there's an inherent incentive to prioritize trading volume. This can lead to:

  • Excessive portfolio turnover (which triggers taxable events)
  • Recommendations for complex products that generate higher commissions
  • Pressure to consolidate assets even when your current allocation is working

4. Liability Gaps

This one catches many business owners off guard: when you work with a broker-dealer on your company's 401(k) plan, you bear the legal liability if disputes arise over excessive fees or unsuitable recommendations. The broker doesn't share that responsibility.

A fiduciary advisor, by contrast, shares responsibility and provides legal backing, a significant protection that many high-net-worth individuals and business owners overlook.

We discuss these liability concerns frequently on our podcast at www.1715tcf.com, where we break down the real-world implications for executives and business owners in our community.

Why This Matters More Than Ever in 2026

The financial landscape in 2026 is more complex than ever. Between tax law changes, market volatility, and increasingly sophisticated investment products, the gap between "suitable" advice and "best interest" advice is widening.

Consider these scenarios where the difference becomes critical:

RSU Vesting and Concentrated Stock Positions: A broker might recommend holding employer stock because it's "suitable", while a fiduciary would analyze your overall risk exposure and create a diversification strategy.

Estate Planning: With potential estate tax changes on the horizon, having an advisor who coordinates with comprehensive estate planning tools isn't just helpful, it's essential.

Tax-Loss Harvesting: Many brokers simply don't offer daily security-level tax-loss harvesting because it doesn't generate commissions. A fee-only fiduciary has every incentive to capture tax alpha for you.

A balanced financial scale illustrating fiduciary best interests versus hidden broker-dealer conflicts.

How to Tell If Your Advisor Is a Fiduciary

Here's the good news: finding out is straightforward. Ask these questions directly:

  1. "Are you a fiduciary 100% of the time?" Some advisors are fiduciaries for certain accounts but not others. Get clarity.

  2. "How are you compensated?" Fee-only advisors earn money solely from fees you pay for advice. Fee-based advisors may also earn commissions, a crucial distinction.

  3. "Will you put your fiduciary commitment in writing?" A true fiduciary will have no hesitation signing a fiduciary oath.

  4. "Are you a Registered Investment Advisor or a broker-dealer?" RIAs are held to the fiduciary standard. Broker-dealers are not.

If your current advisor hesitates, deflects, or gives vague answers, that tells you everything you need to know.

Making the Move to Fiduciary Advice

Switching from a broker to a fiduciary advisor is easier than most people expect. Here's what the process typically looks like:

Step 1: Gather Your Statements
Compile recent statements from all investment accounts, retirement plans, and insurance policies.

Step 2: Schedule a Consultation
A good fiduciary advisor will offer a no-obligation review of your current situation. At Davies Wealth Management, we regularly conduct these assessments for executives, business owners, and high-net-worth families throughout Stuart, Jupiter, and Martin County.

Step 3: Review the Analysis
Your new advisor should provide a clear comparison showing where you may have been paying unnecessary fees or holding suboptimal investments.

Step 4: Execute the Transition
Most account transfers can be completed within two to three weeks without liquidating positions or triggering taxable events.

The key is working with an advisor who takes the time to understand your complete financial picture: your career, your family situation, your goals, and your concerns. Traditional wealth management that combines human expertise with modern tools consistently delivers value that justifies the engagement.

The Bottom Line

The suitability standard isn't illegal. It isn't even necessarily unethical. But it does create a system where your interests and your advisor's interests can diverge: often without you ever knowing.

Working with a fiduciary doesn't guarantee perfect investment performance. Markets will always have ups and downs. But it does guarantee that every recommendation is made with your best interest as the primary consideration.

That peace of mind: knowing your advisor is legally obligated to put you first: is worth more than most people realize until they experience the alternative.

If you're questioning whether your current advisory relationship is truly serving your goals, we're here to help. Reach out to Davies Wealth Management for a confidential review of your situation. No pressure, no obligation: just an honest assessment of where you stand and what might be possible with fiduciary guidance on your side.