Understanding Financial Advice

What’s the Difference Between an RIA and a Broker/Agent?

The main difference is this: a Registered Investment Advisor (RIA) has a fiduciary responsibility to you — a Broker or an Insurance Agent does not.

  • A Registered Investment Advisory (RIA) has a fiduciary duty to place a client’s interests ahead of his own. Brokers/Agents have no such obligation.
  • A broker/agent essentially functions as a sales person—your interests do not come first,  as their first duty is to their firm.
  • The nature of a broker/agent’s compensation and his relationship with his employer might seriously diminish a client’s chance of achieving critical financial goals.
  • If a broker/agent takes commissions from the funds that he buys, his decisions might be biased or self-serving.  The integrity of advice might be compromised.  Whensales incentives (their firm’s products) or job security issues drive a broker’s buying decisions, his client’s interests might suffer.
  • You may not be offered the most economical fee/commission payment option, or fees might be disguised.
  • Brokers/Agents do not always clearly identify themselves as such.  There is a big difference between a Registered Investment Advisor and the other similar titles improperly used by brokers such as “financial advisorfinancial consultant, or financial planner.
Knowing this will help you recognize who you are dealing with – a broker/agent or a Registered Investment Advisors (RIA)