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Brokers vs Advisors
When seeking professional financial advice, most people try to find someone they believe has the appropriate expertise and experience to guide them. Financial advice comes in many forms and the brokerage industry has intentionally created confusion by creating titles such as financial planner, financial consultant, financial advisor in lieu of stockbroker to imply that these titles represent people providing the same services as a Registered Investment Advisor.
Actually, there's a wide chasm between brokers and investment advisors, though you can hardly tell if you just go by their titles. Brokers are held to a different standard than registered investment advisers. Registered Investment Advisors must abide by the rules of the Investment Advisers Act of 1940, which legally obligates them to act solely in the best interests of their clients. For brokers, there is no legally enforceable standard that obligates them to act solely in the best interest of their clients. In fact, they are simply held to a standard of suitability which means they must reasonably believe that the investments they are recommending are appropriate for the client without regard to the client’s best interest. The broker’s first allegiance must be to his or her firm and the client falls somewhere down the line. The SEC has recently ruled that the brokerage firms must disclose in plain English that they offer brokerage accounts –not advisory accounts – and that the broker’s interest may not be the same as those of the clients.
At Wealth Dimensions, we embrace our legal duty and, more importantly, our moral duty to always act in the client’s best interest.
