Insights
Fiduciary duty and suitability, explained.
The person across the table may be an investment adviser, a broker, an insurance agent, or all three. Each role has its own standard of conduct. Here is how they differ, and how to tell which one applies.
Three roles, three rule books
In financial services one person can hold more than one license. Each license comes with its own regulator and its own standard for how a recommendation must be made.
- Investment adviser
- Gives advice for a fee. Regulated by the SEC or a state securities regulator. Owes a fiduciary duty across the whole relationship.
- Broker-dealer
- Buys and sells securities for customers, usually for a commission. Regulated by the SEC and FINRA. Recommendations to retail customers fall under Regulation Best Interest.
- Insurance agent
- Sells insurance and annuity contracts, usually for a commission paid by the insurer. Regulated by each state's insurance department, under state rules.
The adviser's fiduciary duty
Federal law has long treated an investment adviser as a fiduciary to its clients. In 2019 the SEC set out its view of what that means: a duty of care and a duty of loyalty, owed together.
Care means advice in your interest, based on a reasonable understanding of your goals, your finances and your tolerance for risk. It also covers how trades are placed and how the account is monitored.
Loyalty means the adviser may not put its own interest ahead of yours. It must give you full and fair disclosure of its conflicts of interest, so that you can consent with the facts in front of you.
The duty runs for the whole relationship, and its scope follows the agreement you sign.
The standard for brokers
For many years the main rule for brokers was suitability: a recommendation had to be suitable for the customer, given their age, finances, goals and tolerance for risk. FINRA's suitability rule still applies to recommendations outside the rule described next.
Since 2020, a broker-dealer recommending a security or an investment strategy to a retail customer must meet Regulation Best Interest, an SEC rule. The broker must act in the customer's interest at the time of the recommendation, may not put its own interest ahead of the customer's, and must disclose and manage its conflicts.
One difference matters in practice. A broker's obligation attaches to each recommendation. It does not, by itself, create a duty to keep watching your account afterward, unless the broker agrees to do that. An adviser's duty runs across the relationship.
The standard for insurance sales
Insurance is regulated state by state. Each state's insurance department sets the rules for how agents recommend and sell products, including annuities. Many states have adopted a model regulation from the National Association of Insurance Commissioners that sets a standard of conduct for annuity recommendations.
Agents are usually paid a commission by the insurance company, built into the product.
One person, more than one role
It is common for one person to be an investment adviser representative, a registered representative of a broker-dealer and a licensed insurance agent. The standard that applies depends on the role they are acting in for that recommendation, not on the person. An advisory fee and a sales commission are different payments, made under different rules.
Form CRS was created so you can tell these apart. Every SEC-registered adviser and broker-dealer with retail customers must give you one. It sets out services, fees, conflicts and the standard of conduct in a few plain pages.
At Acrylic
Acrylic's brochure says that when acting in an advisory capacity through Acrylic, supervised persons are held to a fiduciary standard. When acting as registered representatives of a broker-dealer or as insurance agents, they operate under the rules and standards for those roles, and that work is not conducted through Acrylic.
The brochure also says the offer and sale of insurance products by Acrylic's supervised persons is not made in their capacity as a fiduciary. Clients are not required to buy any commissionable product through them, and may buy such products through unaffiliated brokers or insurance agents.
Form ADV Part 2A, brochure dated March 3, 2026, Items 5E, 10A and 10C.
Conflicts, and how they are handled
No standard makes conflicts of interest disappear. What the rules require is that conflicts are disclosed, and in some cases reduced or removed. Common ones include a fee that grows with your assets, a commission that varies by product, and a firm with affiliates that earn money from your account.
At Acrylic
Acrylic's Form CRS says: "When we act as your investment adviser, we have to act in your best interest and not put our interest ahead of yours." It goes on to say that the way the firm makes money creates some conflicts with your interests.
Among its examples: its financial professionals may be able to receive commissions, which gives them an incentive to recommend products that pay more. And its broker-dealer, Brooklight Place Securities, is affiliated with Acrylic through common ownership, so you should assume that when the broker-dealer makes money on your accounts, Acrylic benefits as well.
Form CRS, dated April 30, 2025, Item 3. Form ADV Part 2A, Item 10.
Questions to ask
Ask these about any recommendation, from anyone, and keep the answers.
- Are you acting as my investment adviser on this, or as a broker or an insurance agent?
- How are you, and your firm, paid if I follow this recommendation?
- How might your conflicts of interest affect me, and how will you address them?
- Can I buy this somewhere else, and would it cost me less?
- Will anyone keep watching this after I buy it?