|Registered Investment Advisor||Brokerage Firm|
|3rd-party custody||In-house custody|
In a 2010 poll published in Forbes, 75% of those questioned believed that the term “financial advisor” implied a fiduciary duty. It does not. 75% thought that “financial planners” are held to a fiduciary standard. They may not be.
Under the fiduciary trust standard, a Registered Investment Advisor must provide its best advice to a client.
Stockbrokers or registered representatives (sometimes called investment advisors, financial advisors, wealth managers, etc.) are governed by the “suitability” standard and are not fiduciaries. The “suitability” standard does not require a stockbroker to place the interests of its clients ahead of its own.
In the end, a Registered Investment Advisor is subject to the high fiduciary legal standard when providing investment advising services while the stockbroker is not. This could have a significant effect on the quality and composition of your portfolio, the fees that you pay and the eventual performance outcome.