The registration status is important because only investment advisors are required to follow a fiduciary standard. Brokers and dually registered advisors (advisors registered as both an investment advisor AND a broker) are more likely to have conflicts of interest. For example, brokers may be incentivized to promote certain products over others because they can receive a higher sales commission. Similarly, brokers can participate in a revenue sharing program.
Advisors are registered with the SEC and held to a fiduciary standard. (1) They provide financial advice and are legally obligated to act solely in the best interest of their clients. Certified Financial Planners (CFPs) are also required to act as a fiduciary.
Brokers are registered with FINRA and only held to a “suitability” rule. They receive commissions based on the products they sell, not the ongoing advice they provide, and can recommend a transaction if there is a “reasonable basis to believe” it's suitable for the customer. (2)
Dually registered advisors act as both an advisor and a broker. Since they are registered with both the SEC and FINRA, like brokers, they are more likely to have conflicts of interest because they can switch legal obligations at any time.
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