Brokers & Independent Advisors: What’s the Difference?

Most people aren’t aware that there are two very different types of financial advisors: brokers and independent advisors.

Brokers Work for Big Financial Firms

Broker Morgan Stanley

broker is someone who works for a broker dealer, like the billion dollar firms Morgan Stanley or Merrill Lynch, a Bank of America corporation, employed to sell their products.

Brokers operate with big advertising budgets to promote them, so you’ll see them ranking prominently in internet searches.

How Brokers Are Paid

Broker Merrill Lynch

Brokers are limited to recommending only the investment products their broker dealer offers. When they sell products to a client, they are paid a sales commission by the broker dealer.

In many cases brokers are not allowed to sell products that don’t have front-end expenses.

Broker’s Obligation

A broker’s only responsibility is broad: to recommend products that are not considered “unsuitable” for their clients.

Registered Investment Advisors (RIA) Work for You

John Kamola, Sonoma County CA financial advisorRegistered Investment Advisor does not sell investment products. We are not obligated to or paid by any third-party investment company.

How We Are Paid

We are paid by our clients on an hourly or project basis for comprehensive personalized planning, and we are truly objective in our recommendations. Our only motivation is your financial security.

RIA’s Obligation

As a Registered Investment Advisory firm, we are held to a higher legal standard, acting as a “fiduciary” to our clients. This means that our fundamental obligation is to act in their best interest.

By law, an RIA can only offer products that are solely in our client’s best interest.

 

Regulation

Registered Advisory Firm with California Department of Business OversightBrokers are regulated by the Financial Industry Regulatory Authority (FINRA).

Independend financial advisors like JW Financial Advisors are regulated by regulatory associations that set standards for them, depending on the type of financial services they provide.

RIAs are regulated in California by the Department of Business Oversight.

Contact Me

For personalized guidance on any financial concerns, contact me.

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