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A Registered Investment Advisor (RIA) has a fiduciary duty to act in the best interests of the client at all times. Brokerage firms, on the other hand, are held to “suitability” obligations on the part of their broker-dealer when making investment recommendations but are not necessarily bound to a fiduciary duty. As such, we encourage all individuals seeking advice to ask, “Are you a fiduciary?”
Investment advisors provide their clients with a written disclosure statement. The disclosure statement details exactly how the investment advisor does business and obtains the client’s consent to any conflicts of interest which may exist with the investment advisor’s business. Brokerage firms are not required to provide customers with any comparable type of disclosure.
Finally, an investment advisor manages investments of others for a fee. Most investment advisors are paid an asset-based fee, so their interests are directly aligned with the clients’. While some Stockbrokers are now adopting fee based pricing, most are still transactional in nature, and sell securities products for a commission. |
