Investor Survey*:

When asked whether they believe registered investment advisors (RIAs) or stockbrokers (registered representatives) have a fiduciary responsibility to act in the investor's best interest…

74% were not aware that only RIAs have a fiduciary responsibility to act in investors' best interests in all aspects of the financial relationship.

*TD AMERITRADE survey of 1,000+ U.S. investors conducted by Penn, Schoen & Berland Associates, 2006

Another Investor Survey*:

76% were wrong in believing that “financial advisors” –a term used by brokerage firms to describe their salespeople --are held to a fiduciary duty.

Over 60% mistakenly believe that stockbrokers are investment advisers.

Only about 29% understand that the primary service of stockbrokers is to “buy and sell stocks, bonds, mutual funds, and other investment products on behalf of their clients, and they give only limited advice that is directly related to those transactions.”

* Consumer Federation of America, AARP, the North American Securities Administrators Association etc survey of 1,319 U.S. investors conducted by ORC/infgroup, August 2010

The Different Options:
Advisor (RIA)
Registered Representative (stockbroker)

There are important differences between Independent Registered Investment Advisors and Registered Representatives. Make sure you understand what they are.

Independent RIA:
  • In the business of giving advice
  • Independent: RIA firm typically not owned by another
  • Fiduciary: legally required to put clients' interests first (a higher standard than suitability)
  • Typically fee-based compensation for advice (asset-based or performance-based)
  • Regulated by the SEC or states (as applicable)
Registered Representative(Stockbroker):
  • Brokerage firm primarily in the business of buying and selling securities
  • Registered Representative typically an employee/contractor of brokerage firm
  • Typically compensated by commissions on product transactions
  • Held to suitability standards, not fiduciary standards
  • Often "look like" an advisor in marketing collateral and Web sites
  • Regulated primarily by FINRA (a self-regulatory organization)
Questions you should ask yourself:
  • What am I looking for — assistance with buying/selling securities, investment advice, or both?
  • How do I want to pay my financial professional? Fees? Commissions?
  • How important is it that my financial professional have a fiduciary responsibility to put my interests first?
Make sure you read the fine print!

After reading the disclosures on a brokerage firm's Web site:

79% of investors said that they would be less likely to go to a brokerage firm for financial advice.