CONTACT US
Client Logins

Get your free financial assessment >

Click Here
Broker v. fiduciary comparison

Broker vs. Financial Advisor: What’s the Difference?

Share This:
Man standing with arms crossed: Fiduciaries: puts client needs first

There are two main types of professionals in finance: brokers and registered investment advisors. Although both deal with financial and investment products, there is a significant difference between the two. Brokers are required to meet a suitability standard, but licensed financial planners must meet a fiduciary standard.

Differences Between Fiduciary and Broker Standards

The fiduciary standard requires advisors to prioritize client interests over their own. When faced with two identical investment options that have different fees, an advisor operating under the fiduciary standard must recommend the product that has a lower cost to the client. This even applies when it means less earnings for themselves and their company. On the other hand, the suitability standard offers financial advisors more flexibility. It only mandates that investments align with clients’ investment goals, timelines, and experience.
Financial advisors are required to act in alignment with the interests of their clients. Failing to do so can result in disciplinary action, such as loss of licenses, fines, and even imprisonment. As a result, most fiduciaries sincerely try to protect their clients’ financial interests.
Meet the Trajan Wealth Fiduciaries

Key Differences Between Brokers and Advisors in Practice:

The fiduciary standard, with its strict rules, offers greater protection for individual and institutional investors compared to the suitability standard. Understanding that the duties of a financial fiduciary include acting with their client’s interests in mind can help alleviate concerns and provide confidence when investing.

  • Financial advisors must disclose conflicts of interest and operate with full transparency. This includes revealing if they are receiving commissions or ongoing fees from recommended investment products.

  • Once brokers sell a product, they aren’t responsible for monitoring or advising clients on that investment. In contrast, a registered investment advisor must review and analyze clients’ investments.

  • Brokers are regulated by the Financial Industry Regulatory Authority, while advisors are regulated by the Securities Exchange Commission or by state securities regulators.

  • Investment advisors have the authority to make trades and adjustments to a client’s account without first obtaining their explicit permission. A broker does not have the same level of discretionary authority and must receive the client’s express permission before executing any trades within the account.

Some financial professionals hold both designations and are licensed as brokers/dealers and registered investment advisors. In such cases, we encourage you to ask in which capacity the professional is acting in any given situation.

Find Financial Advisors You Can Trust at Trajan Wealth

Now you know why understanding the distinctions between brokers and financial advisors is essential for making informed decisions about your investments. The fiduciary duty upheld by financial advisors provides a higher level of protection and transparency, ensuring that the client’s interests are the top priority.
If you have further questions, please reach out to us for answers. If you require professional assistance with wealth management, reach out to our local office and talk to an experienced Trajan Wealth financial advisor near you, or just give us a call.

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.

More
Articles