Broker vs. Registered Investment Advisor
What’s the difference?
There are two general categories of advice available to investors: brokerage accounts and advisory accounts. Unfortunately, most investors don’t know the difference between these two types of advice.
The following information is provided to help you understand the differences between brokerage firms and independent investment advisors like Skyline Advisors.
Read more about the differences and similarities between an Advisor and a Broker and the rules that apply.
Read more about the Fiduciary Standard of Care and how it applies to Skyline Advisors.
| Broker/Brokerage Accounts | Registered Investment Advisor/Advisory Accounts | |
|---|---|---|
| Fiduciary Status | Only when connected to and reasonably related to the buying and selling of securities. Episodic. | Registered Investment Advisors must follow the Fiduciary standard of care and act in the clients’ best interests. |
| Financial Planning | Not usually. If they do, it is often utilizing a basic software tool. | Yes. Comprehensive and based on client conversations. Software is used as a tool, but not an outcome. |
| Ownership | Large corporation with national presence. Brokers are employees or subcontractors. | Locally owned and operated. Independent. Small business. |
| Account Placement | Limited to Broker’s parent company. | May choose account platform that best fits client needs. |
| Breadth of Offerings | Vast, but may direct investment to in-house proprietary products. | Vast and open-architecture platform where investments are selected that fit client goals exclusively. |
| Type of Professional | A broker is an intermediary between a buyer & seller. They arrange transactions suitable for clients. | A Registered Investment Advisor manages relationships from a holistic perspective across multiple financial topics. |
| Investment Decisions | The broker typically relies on their parent company for recommendations and portfolio allocations. | The Registered Investment Advisor is usually the investment professional and clients have direct access to the decision maker. Investments and allocations decisions are made in a coordinated effort between advisor & client. |
| Investment Research | Research provided by parent company. | Research from multiple independent resources to obtain third party insight. |
| Legal Standard | FINRA conduct rule limits recommendations to suitable investments. | SEC Requirement of a Fiduciary Standard: RIA Must Act in Best Interest of Client. |
| Compensation | Wages, Commissions, Loads, 12b-1s, Finder’s Fees, Sales Bonuses. Based on the Type of Securities and Number of Trades. | Management fee based on assets under management, regardless of transactions or which investments are chosen. |
| Disclosures | Limited disclosure requirements and don’t have to duty to remove conflicts of interest. | Full Disclosure Requirements as Required by the SEC, fiduciary law, state laws and Uniform Prudent Investor Act. Eliminate as much as possible any conflicts of interest. |
| Proprietary Products | Many brokers offer their parent company’s investment products and receive extra compensation for doing so. | No proprietary products. |
| Education | Typically a sales background, but more experienced brokers have investment/planning education. | An investment education and/or financial planning background. Not a salesperson. Some advisors have more education than others. |
| Cost | Expenses are hidden and hard to understand. Typically more expensive. | Registered Investment Advisors disclose management fees. Typically less expensive. |
The relationship is the priority
Financial Advisors working under the principles of honesty, integrity and trust
Skyline Advisors finds that people want to work with Financial Advisors/Planners they trust, and the foundation of that trust is an advisory practice where the professionals are all Fiduciaries and all work together as a Team in an independently owned and operated business. Our CLIENTS are just that, CLIENTS. Not customers.
Why choose a broker when you can receive objective and independent advice from someone who will work with you, not sell you something expensive. Contact Skyline Advisors and talk to a Fiduciary Advisor.
For more on Independent Financial Advisors: https://www.
HELPFUL RESOURCES
Here are some good resources to understand the difference between Advisors and Brokers.
FIDUCIARY ADVISORS ACTING IN YOUR BEST INTEREST
We follow the Fiduciary standard of care which is a legal standard that requires Skyline Advisors to put our clients’ interests first and foremost with undivided loyalty.