Broker vs Advisor

What's the difference?

Selecting and receiving financial services from people you trust is challenging because there are so many financial professional labels and titles, motivations and terminology. The list of titles you may see on a business card is long and can often be unhelpful.

  • Financial Advisor
  • Financial Planner
  • Investment Advisor
  • Broker

  • Stock Broker
  • Insurance Professional
  • Financial Representative
  • Wealth Manager

  • Wealth Management Advisor
  • Registered Representative
  • Associate Advisor…


What do they all mean?

What are the rules and who can do what? Unfortunately, regulators struggle with these questions too and the rules keep changing. As of June 30, 2020, the Securities and Exchange Commission has adopted Regulation Best Interest (Reg BI) to help clarify the difference between selling a product versus providing advice. But, the definitions are arguably even more confusing now. We’ll try and provide some clarity, but be prepared, the waters are murky:


Broker (ex. Stock Broker)

Traditionally, a broker is a “registered representative” of a Broker Dealer (BD) whose role is to facilitate the distribution of securities products. Think of a salesperson whose job is to sell you something off the store shelf that is suitable for your needs. The people that sell or “deal” the products are the brokers. They are employees or subcontractors of the BD and earn compensation in a variety of ways, but typically can include wages, commissions, trails (ongoing income), sales bonuses, finder’s fees and other transactional compensation. The BD, which could be a big bank or financial institution (they are often one and the same) may offer proprietary in-house products that the Broker is incentivized to sell to their customers. Brokers are regulated by FINRA, the Financial Institution Regulatory Authority and have a legal obligation to collect your financial vital information in order to sell or buy something “suitable” to you. Not a Fiduciary. They can prioritize an investment that pays them a larger commission. The rules that apply to Brokers has changed under Reg BI. One major change under the new regulation is that most Brokers are not supposed to be called Advisors any longer in order to separate them from Investment Advisors as described below.


Investment Advisor (Registered Investment Advisor)

A financial advisor is a pretty generic title. The idea is that many people need professional financial advice in addition to the investment products they own and there should be strict rules to protect investors. If you are going to hold yourself out as a professional financial advisor, wealth manager or financial planner who manages investment portfolios for clients, you must “register” with the proper authorities, hence the title “Registered Investment Advisor” (RIA).

An RIA is an entity and the people providing the advice are Investment Advisor Representatives (IARs). In our case, Skyline Advisors is a Registered Investment Advisor and our advisors are IARs. They (we) must be registered in the states they operate in and regulated by either the state, or by the Securities and Exchange Commission (SEC) if they meet certain requirements.  Skyline Advisors meets the “large advisor” requirement and is therefore registered and regulated by the SEC. This registration is important because of the rules that the advisor must follow and the protections afforded to the client. You can check for a financial professional’s advisor/broker status here, but note that the result often doesn’t tell the whole story. If you would like to understand more, please contact us.

Financial Planners and Advisors are often one and the same. Advice is a tool used to implement a financial plan. Skyline Advisors could really be called Skyline Planners because of our integration of advice and planning within our client relationships.

Skyline Advisors integrates our advice with our financial planning and investment management and the cost for this service is an asset based fee based on a percentage of the value of the managed accounts regardless of the investment holdings or number of transactions. In fact, we pay a fee to the account custodian, Charles Schwab, so that our clients don’t have to pay Schwab’s transaction fees when they occur.

The Registered Investment Advisor business model replaces a Broker oriented product sale business model with a more holistic and comprehensive client engagement where the Advisor can manage investments without the conflict that comes from selling products and earning commissions.

A Registered Investment Advisor has an obligation to collect financial vitals just like a Broker, but they follow a much higher legal standard of care called a Fiduciary standard. They must put a client’s interests above their own and must act with loyalty, due care and utmost good faith towards their clients. This does not change under the new rules.


So, Are brokers bad and advisors / Planners Good?


So, are brokers bad and advisors/planners good? While the traditional brokerage industry is fading as more and more investors want ongoing fiduciary financial advice and planning, there are certain legacy products or special situations where brokers are still very important. And, brokers are often providing advice even though they are held to a lower standard of care as compared to Registered Investment Advisors and are now not even supposed to be called Advisors.


Enter this new regulation, Reg BI. It basically says that brokers can provide fiduciary advice if it connected to and reasonably related to the buying and selling of products, but not have to follow the “advice rules” under the fiduciary standard of care. That doesn’t seem to make sense. They can provide conflicted advice? Yes, if they disclose it. It also infers that brokers can provide episodic advice. Basically, they stop providing advice after the product is sold and consequently, their fiduciary status also stops. Confusing?

Many fiduciary financial advisors, including us, don’t like the new rule because it is the result of a questionable interpretation of the law and makes the financial advice landscape even more confusing and waters down the definition of fiduciary. How can someone be a real fiduciary if it doesn’t apply all the time? Lawsuits by several states and financial organizations are pending against the SEC because of this rule. Democrats have also signaled that they may reform or scrap this regulation altogether. In the meantime, we are all required to prepare and deliver a new Form CRS that is designed to make our services and compensation more clear. You can be the judge. Find our Form CRS and ADV here.


Here are some good resources to understand the difference between Advisors and Brokers.



For a fun video of the differences between an Advisor and Broker using the Butcher vs. Dietician analogy.

Check it out

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.


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.