You are ready to invest, but you do not know much about the stock market. So, you enlist the help of a professional to recommend investments. These professionals may be a financial adviser or a broker. You should be aware, though, that financial advisers and brokers are held to two different standards of care. A financial adviser’s duties Financial advisers have a fiduciary duty to act in their client’s best interests. This means prioritizing the client’s interests above others, ensuring there is no conflict of interest and letting the client know of any material conflict should it come up. Financial advisers can look towards any source to find investments. They can charge a fee for their services. Generally, this is a percentage of the assets. A broker’s duties Brokers do not have a fiduciary duty. They must comply with regulatory requirements, but they are not held to the higher standards of fiduciaries. Instead, brokers must follow the suitability standard. This means they can recommend investments that they think are good, but they are not bound to make recommendations that are in the investor’s best interests above all others. Brokers might encourage specific investments that would garner the broker a greater commission or share in the investment, and this is permissible. Brokers are limited, however, to suggesting investment that are on their specific platform. No guarantees can be made There is no guarantee that either a financial adviser or a broker will always give good advice. They just must meet either their fiduciary duties or the suitability standard, respectively. So, you will want to assess your options carefully so you can work with an investment professional that you trust. The post How do financial advisers differ from brokers? first appeared on Hubbard Snitchler & Parzianello PLC.
