Registered Investment Advisor vs. Broker

What’s the difference?

In today’s financial world, 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.

Independent Registered Investment Advisors like Skyline Advisors operate under the highest standard of responsibility to their clients.

The following information is provided to help you understand the differences between brokerage firms and independent investment advisors.

Financial Advisor vs. Broker Table
Broker/Brokerage AccountsRegistered Investment Advisor/Advisory Accounts
OwnershipLarge corporation with national presence. Brokers are employees.Locally owned and operated. Independent. Small business.
Account PlacementLimited to Broker’s parent company.May choose account platform that best fits client needs.
Breadth of OfferingsVast, but may direct investment to in-house proprietary products.Vast and open-architecture platform where only best investments are utilized.
Type of ProfessionalA 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 DecisionsThe broker typically relies on their parent company for recommendations and portfolio allocations.The registered investment advisor is 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.
Legal StandardFINRA conduct rule limits recommendations to suitable investments.SEC Requirement of a Fiduciary Standard: RIA Must Act in Best Interest of Client.
CompensationCommissions, Loads, 12b-1s, Finder’s Fees, Sales Bonuses. Based on the Type of Securities and Number of TradesManagement fee based on assets under management
DisclosuresLimited disclosure requirements.Full Disclosure Requirements as Required by the SEC, fidicuary law, state laws and Uniform Prudent Investor Act. (ADVII)
Proprietary ProductsMany brokers offer their parent company’s investment products and receive extra compensation for doing so.No proprietary products.
EducationTypically a sales background, but more experienced brokers have investment education.An investment education and/or financial planning background. Not a salesperson.
CostExpenses are hidden and hard to understand. Typically more expensive.Registered Investment Advisors disclose management fees. Typically less expensive.

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 Registered Investment Advisors, please visit www.riastandsforyou.com.