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A Broker Or A Fiduciary? Which Is The Best Choice For You?


Wealth management is so important to maintaining financial stability. But for many, the financial world is a mysterious maze filled with confusing regulations and complicated language. Those who enter this maze without trustworthy and experienced advice put their wealth at extreme risk.

There are numerous companies that claim to have expertise in managing your assets, but few back up that assertion with transparent methods of operation. Some, in truth, are more interested in directing your money into investments that will earn them the highest commission as opposed to earning you the best return on your investment. This is why you should know the difference between a broker and a fiduciary.

A Brief Comparison

A professional who holds a legal relationship of trust to take care of your money or other assets is called a fiduciary. For example, managers of pension plans, endowments and other tax-exempt assets are considered fiduciaries under applicable statutes and laws. In a fiduciary relationship, you the client vests good faith, reliance and trust that this professional whose aid, advice or protection you seek will at all times act for your benefit and interest.

Under current law, brokers, insurance salespersons and advisors operate under a “suitability standard” that only requires them to ensure an investment is suitable for a client at the time it is made. However, Registered Investment Advisors manage your wealth under a “fiduciary standard” and, by regulatory rules, must avoid all conflicts of interest and operate with full transparency.

A broker operating under the suitability standard will tell the client that, based on goals and risk tolerance, the majority of investment capital should be put into a stock mutual fund. The client is given a prospectus and buried deep in this document, written in “legalese,” it may state that the bank that employs the broker operates the fund they recommend. It may even mention an ongoing “trailing” fee in addition to the sales commission received from the client. But once the client signs up for that fund, the advisor has little further legal obligation to monitor that investment.

This relationship is much different when the financial advisor operates under the fiduciary standard. Any and all conflicts of interest must be disclosed to the client. Also, a fiduciary has a “duty to care” and is responsible to continually monitor the client’s investments and his changing financial situation. With a professional under the suitability standard, your financial planning process could begin and end in a single meeting. However, with a fiduciary advisor, the first meeting with a client is only the beginning of a process to maximize the management of your assets.

Get Your Questions Answered

In the final analysis remember that, above all, this is whom you will choose to manage your money. You must be proactive when considering which financial professional to trust as your advisor. Many investors believe a broker regularly analyzes their portfolio and are surprised to learn they don’t. Why pay large annual fees to a passive financial manager? If your advisor is not analyzing your portfolio quarterly, you need to have a deep discussion of all the services you pay for each year.

In the end it comes down to a matter of trust in your financial success. Between two financial advisors — one a fiduciary and the other a broker held only to the suitability standard — the difference in fees should not be the deciding factor. Invest with a fiduciary advisor whose transparent method of operation has your best interests as a reason for being.

For more information on making the choice between a broker or a fiduciary, and other topics to help you get the best return on your investment, visit


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