Broker Check

Your Broker Ain't Your Buddy

| April 07, 2017
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Do you know the difference between a broker and a Registered Investment Advisor (RIA)?  You need to.

The first is an employee of a brokerage firm, tasked with generating profits for their company through the sale of investment products and services.  What about their allegiance to their clients?  They only have to show that the stuff they sell is "suitable."  

RIA firms, on the other hand, don't earn commissions, don't have any conflicts of interest (or must disclose the ones they have), and their only form of compensation comes directly from their clients for ongoing advice and investment management.  They have a "fiduciary" responsibility, they have to put their clients' best interests first.

Servo is a RIA firm.  I wouldn't have it any other way.

Why does this distinction matter?  Because when your "advisor" is concerned first and foremost with selling products that generate profits, clients often pay a hefty price.  Here's an article about a "star" broker from Credit Suisse who sold investments that produced $3.2 million of excess commissions for him and his firm.  He knew that virtually identical investments were available with lower costs that would have benefited his clients more, but chose to put his interests ahead of his clients'.  The good news is, he was caught and forced to pay back millions in fines.  Unfortunately, many of these broker indiscretions go unnoticed.  

If more investors understood the important distinction between brokers and advisors, we'd see far fewer investor abuses and far better investor outcomes.  You can do your part by spreading the word.

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