THE DIFFERENCES BETWEEN A REGISTERED INVESTMENT ADVISOR AND A STOCKBROKER
By: Louis P Stanasolovich, CFP®

It is important for the general public to distinguish between fiduciaries who are responsible for investing someone else’s assets and are required by law to work in the client’s best interests and non-fiduciaries who are stockbrokers who typically sell products, are required to work in their employer’s best interests. One way for the public to differentiate between types of advisors is simply by asking their financial professional if they are registered as an investment advisor. If they or their company are not registered, then they are not a fiduciary, which means their first priority is satisfying the needs of his or her employer (such as meeting sales quotas or selling certain types of products). This is what is known as an inherent conflict of interest. It also means that this person is not a financial planner. If a stockbroker says he or she provides financial planning services, they must be registered; otherwise, they along with his or her firm are in violation of federal regulations.

Unfortunately, stockbrokers and brokerage firms are not prohibited from calling themselves "financial advisors," or "financial consultants," or similar terms that give the impression that they are Investment Advisor Representatives.  The financial advisory industry believes the SEC should require brokers to register so that they have the public’s best interest in mind when providing advice. This will force brokers and their firms to act as fiduciaries, placing their clients’ best interests ahead of their own. Until this becomes reality, investors should realize that when dealing with brokers and brokerage firms that the advice they are receiving may not be in their best interest.

Legend Financial Advisors, Inc.®
5700 Corporate Drive, Suite 350
Pittsburgh, PA 15237-5829
Phone: (412) 635-9210
Fax: (412) 635-9213
Toll Free: (888) 236-5960
E-mail:
legend@legend-financial.com
Web Site: www.legend-financial.com