We will take a look and examine the difference between a financial professional who is a broker and one who is an investment advisor/fiduciary. You will then be able to determine if your “advisor” is working for you or themselves.
First, we will start by looking at some significant key differences:
- Investment or financial advisors are paid a flat fee or percentage of the assets they have under their management to advise clients on securities and/or manage client portfolios.
- Brokers are paid commissions to execute trades, buy and sell assets for clients, or place a client into a specific type of financial product. Their compensation is dependent upon the sale of a security or financial product.
The investment advisor works on a fee-based system that allows them to give unbiased and transparent investment and financial advice, catered to individual client needs, goals, and objectives. Investment advisors will also often manage a variety of investment accounts for their clients.
Brokers typically take the Series 6 and/or Series 7 exam depending on the types of financial products they will offer their clients. Alternatively, investment advisers must pass the Series 65 Uniform Investment Adviser Law Examination.