What’s the Difference?

“Fiduciary” is a word that often comes up when talking about investment professionals, but it is often overlooked or used improperly. The other term that can be used to identify an investment professional is “Suitability”. At The Arkansas Financial Group, we take our fiduciary standard seriously. In this blog, I will explore the characteristics of the fiduciary standard and suitability standards, identify a few key differences between the two, and explain how you are best served by a fiduciary advisor. 

Fiduciary Standard

Fiduciary duty is a legal and ethical obligation that requires financial advisors to always act in their clients’ best interest. It is a requirement of the Investment Advisers Act of 1940 that all Registered Investment Advisors (RIAs) firms, like The Arkansas Financial Group, be fiduciaries. Our regulatory body, the Securities and Exchange Commission (SEC), sees that we adhere to two requirements to our clients, the duty of care and the duty of loyalty. The duty of care obligates that the advisor provides investment advice that is in the best interest of the client, while the duty of loyalty requires advisors to put their client’s interest ahead of their own. 

Aside from the requirements governed by the SEC, we are also governed by the CFP Board since our financial planners are CERTIFIED FINANCIAL PLANNER® practitioners. The final step to obtaining this certification is a pledge to always adhere to the CFP Board’s Code of Ethics and Standards of Conduct, which includes a fiduciary standard in both investment advice and financial planning recommendations. 

Suitability Standard

Broker-dealers, such as Wells Fargo, Edward Jones, Charles Schwab, and Merrill Lynch, are generally only held to the suitability standard, which does not have the duty of care or loyalty. This standard requires that the recommended investment options are appropriate for a client, but not necessary the most optimal. An example is an advisor that is only held to a suitability standard may recommend a certain investment that gives them a higher commission that is not the best for the client’s unique situation. Here, the advisor put their own interests above the clients, thus breaking the duty of loyalty. Another example is a life insurance agent that recommends a client to cancel their existing life insurance policy and purchase a new one. This is often called “churning” policies and is done so that the salesperson receives the large first year premium commission, which is often 50%-100% of the first year’s total premium costs, as opposed to the renewal commission which is normally about 3%-10%. The recommended investments discussed above might still help the clients achieve their goals but could have likely been done better with a lower fee/commission option. There are some nuances in interpreting the suitability standard that are not present in the fiduciary standard.

Key Differences Between Fiduciary and Suitability Standards

The key difference between the two standards is whose best interest is in mind when investment advice is given. If you are working with a fiduciary like The Arkansas Financial Group, you know that your best interest as the client is being followed. If you are working with an advisor that is only held to the suitability standard, you can not be sure if your best interest is truly in mind. 

Go with a Fiduciary

Now that you are more aware of the different standards that investment professionals are held to and governed by, we hope that the choice is obvious. Working with a fiduciary advisor is objectively the better choice. I hope that this article provides peace of mind that you are receiving the best advice for your unique circumstances at AFG. We are always available, so please let us know if you would like to discuss this topic in more detail. 

Jake Spradlin, CFP®

© 2025 The Arkansas Financial Group, Inc., All rights reserved.

The Arkansas Financial Group, Inc. is a Fee-Only Financial Planning Firm located in Little Rock, AR serving clients in Arkansas and throughout the country.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Arkansas Financial Group, Inc. [“AFG]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from AFG. AFG is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the AFG’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.arfinancial.com.

Please Remember: If you are a AFG client, please contact AFG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.