What is fiduciary duty?

Definition

Under the Investment Advisers Act, an investment adviser owes clients a fiduciary duty. The SEC's 2019 interpretation (Release IA-5248) describes it as a duty of care and a duty of loyalty that apply to the entire relationship.

To meet the duty of loyalty, the SEC says an adviser must make full and fair disclosure of all material facts relating to the advisory relationship, and address conflicts of interest.

Why it matters for advisors

Fiduciary duty is the frame for most AI questions at an RIA. Is the AI-assisted advice still in the client's best interest? Have you checked it? Is anything about your AI use, such as a vendor conflict or how client data is used, a material fact clients should know?

The SEC's fiscal 2026 exam priorities say adviser exams will keep focusing on adherence to fiduciary principles.

A practical test many firms use: could you explain to the client, in plain words, how AI was used in the advice you gave them and how you checked it? If the answer would make the client uneasy, that's a sign the process or the disclosure needs work.

Example

An adviser considering an AI portfolio tool asks whether it changes its methods of analysis enough that the brochure should say so, and whether the vendor relationship creates a conflict.

Watch out for

AI doesn't lower the standard of care. If anything, relying on output you haven't checked makes it harder to show you met it.