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InvestmentNews Magazine article - February 2004 - The Difference between a Registered Investment Advisor (RIA), and representative of a broker/dealer (often called stockbroker, financial adviser, representative, etc.). InvestmentNews reports that the Securities and Exchange Commission has had concerns about holding stockbrokers and investment advisors to different fiduciary standards for decades, and that the problem may continue for a long time before those standards are resolved. The article suggests several conflicts exist, and illustrate one part of the problem is the question of, what would happen if brokers were classified as fiduciaries? "This would create more conflicts than it resolves", the article suggests. Do they represent the issuer or do they represent the investor? Stockbrokers must only adhere to the National Association of Securities Dealers' (NASD) ‘suitability’ rule, which requires them generally to obtain information concerning a customer’s financial status, tax status, investment objectives and other relevant information before making a recommendation. They don’t have a legal obligation to recommend their client get the best product at the best price. (the NASD is a self-regulatory body for stockbrokers and their Broker/Dealers) Investment advisors on the other hand are regulated by the Securities and Exchange Commission (SEC) and State Regulators, and are always deemed to be ‘fiduciaries’, which essentially means they are expected to always act in the clients’ best interest, and to disclose any conflicts of interest they as advisors may have. WHAT SHOULD YOU LOOK FOR? When a man wears two hats, do you really know which man you are seeing?
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