There’s a version of this conversation that happens a lot in financial services. An adviser, usually a good person with genuine intentions, explains why they recommended a particular product. The reasoning sounds coherent. The product wasn’t wrong for the client. It was, by most reasonable definitions, suitable.
But it wasn’t the best option. There was something better – cheaper, more appropriate, more closely aligned with what the client actually needed – that didn’t get recommended. And the reason it didn’t get recommended, if you follow the money carefully enough, is that the better option didn’t pay the adviser anything.
This is the gap between suitability and fiduciary duty. It’s a gap the industry has been arguing about for decades. And it matters far more than the technical language suggests.
What fiduciary duty actually means
A fiduciary standard requires an adviser to act solely in their client’s best interest. Not in a way that’s broadly suitable. Not in a way that’s defensible under questioning. In the client’s actual best interest – the best available option, recommended for the right reasons, with full transparency about how the adviser is being compensated.
Not all financial advisers are fiduciaries. Broker-dealers historically operate under a suitability standard that requires only that recommendations fit a client’s general profile, not that they’re optimal.(Source: Worldadvisors )
This distinction is not a regulatory technicality. It’s the difference between a professional whose loyalty is to you and one whose loyalty is divided.
Approximately 90% of financial advisers are dual registrants, meaning they are both financial advisers and stockbrokers.(Source:Highpassasset)
Many of them market themselves as “fee-based” – a phrase that sounds reassuringly close to fee-only but is meaningfully different. A fee-based adviser can receive both client fees and product commissions. A fee-only adviser earns exclusively from the client. The distinction matters because one model creates a structural conflict of interest that the other eliminates.
The commission problem in practice
I want to be precise here, because the commission problem is often misunderstood.
The issue is not that commission-based advisers are dishonest. Most aren’t. The issue is that commission structures create incentives that systematically bias recommendations – often in ways the adviser doesn’t notice, because no one notices the gravitational pull of their own financial interest when it operates subtly enough.
An adviser earning high compensation for recommending a particular policy has a significant financial reason to recommend it. They may genuinely believe it’s the right choice. But the conflict is there, whether or not it’s acted upon, and the client has no way of knowing.
This is what the fiduciary standard exists to prevent. Not because advisers are bad people, but because the structure of the financial services industry has historically been designed to serve product manufacturers and distributors, with client interests as a secondary consideration. The fiduciary adviser sits outside that structure. Their only focus is their client. And that alignment produces better advice.
When fiduciary duty feels inconvenient
Here’s the harder conversation.
There are moments in every adviser’s career when acting in the client’s best interest is genuinely costly. A product manufacturer offers a better commission on a product that is slightly inferior to an alternative. A sales target is achievable if a recommendation is pushed just a little further than the evidence strictly supports. A long-standing client relationship creates pressure to endorse a decision – a property purchase, a business sale, an investment – that you have private doubts about.
These are the moments that define what kind of adviser you actually are. Not the ones where doing the right thing is easy, but the ones where it costs something.
The fiduciary standard doesn’t bend on these occasions. That’s precisely its point. An obligation that applies only when it’s convenient isn’t an obligation – it’s a suggestion.
I’ve worked in this industry long enough to have seen the consequences when advisers bend. The short-term cost of the difficult recommendation – the commission not earned, the relationship strained, the client initially unhappy – is almost always smaller than the long-term cost of the breach. Trust is the foundation of the business, not a feature of it.
The business case for genuine independence
Here’s something I’ve observed consistently: the advisers who commit fully to the fiduciary model — who become genuinely, structurally, verifiably independent — don’t tend to suffer commercially for it. In most cases, they prosper.
There are a few reasons for this.
Clients who understand the fiduciary standard actively seek it. As financial literacy increases and information becomes more accessible, clients are increasingly capable of asking the right questions and recognising the right answers. The adviser who can say — truthfully, demonstrably — that their only source of compensation is their client, that they have no financial relationship with any product manufacturer, and that every recommendation they make is governed solely by what’s best for the client, has a positioning advantage that money can’t buy.
Referrals from genuinely satisfied clients are the most sustainable source of new business in this profession. And genuinely satisfied clients — not clients who are satisfied until something goes wrong and they discover the conflict they didn’t know about — are overwhelmingly the product of genuinely unconflicted advice.
In 2024, more than 72% of adviser revenue in the US was comprised of asset-based fees, and advisers project that commission revenue will continue to decline by 27% over the next two years. (Source: BlackRock) The direction of travel is clear. The question is whether to lead that shift or be dragged by it.
Choosing the profession over the industry
The financial services industry has historically been organised around the interests of product manufacturers and distributors. The financial advice profession — the thing we’re trying to build — is organised around the interests of clients.
These are not the same thing. Sometimes they conflict directly. And when they do, the choice you make tells you — and eventually tells your clients — which side of that line you’re standing on.
Fiduciary duty isn’t optional. Not legally, for those of us bound by it. Not ethically, for anyone who takes the responsibility of advising seriously. And not commercially, for those who’ve understood that genuine independence is not a constraint on building a good practice — it’s the foundation of one.
Sam Instone is CEO of AES International, the only CEFEX-certified fiduciary firm across the Middle East, Asia, and Africa.
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