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Most Americans cannot define this key financial term, and it could cost them

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When it comes to choosing a financial advisor, you'll want to use, and to really understand, one word: fiduciary.

A fiduciary has a legal duty to act in your best interest. Those not working to the fiduciary standard are held only to a suitability standard, meaning their advice must be suitable for your financial situation.

It's a key financial term. Yet most Americans cannot define it, and that puts them at risk.

That finding comes from 401(k) provider Betterment for Business, which recently surveyed more than 1,000 employees currently contributing to an employer-sponsored 401(k) plan.

Just 42 percent of respondents correctly identified the definition of a fiduciary, Betterment reports.

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Furthermore, 20 percent of survey respondents believed that "fiduciary" and "financial advisor" were synonymous, and 27 percent didn't know what a fiduciary was at all.

"Fiduciary" and "financial advisor" are far from synonymous. As professor Harold Pollack and financial journalist Helaine Olen explain in their book, "The Index Card," "a financial advisor working to the fiduciary standard has a legal duty to act in your best interest and is not getting paid to steer you into buying overpriced investment products you don't want or need.

"A majority of men and women offering financial advice don't work to the fiduciary standard."

If you're paying for financial advice, you want someone who will put your interests first, not their own.

If you're paying for financial advice, you want someone who will put your interests first, not their own. So it's important to be specific when asking about whether or not a prospective advisor is a fiduciary, since advisors can be dually registered as a broker (only subject to the suitability standard) and a fiduciary.

Someone is almost certainly working to the fiduciary standard if they are a certified financial planner (CFP), registered investment advisor (RIA) or fee-only advisor, explain Olen and Pollack.

To be sure you're getting the best advice, "You need to ask and ask quite specifically: Do you work to the fiduciary standard at all times?" they write. "This last part, 'at all times,' is important. As the fine print on brokerage forms indicates, the fact that an advisor commits to a fiduciary standard for some of her dealings with you does not hold her to this standard in others."

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