Is your investment advisor also a broker?


Investment advisors that are also brokers, or are affiliated with broker-dealers, are known as dually registered advisors.

Why This Matters



Dually registered advisors have different financial interests when acting as a broker because they are not required to follow a fiduciary standard. For example, brokers can 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.






Advisor and Broker Distinction



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Investment Advisors

Advisors registered with the SEC are held to a fiduciary standard (1), which means they are legally obligated to act solely in the best interest of their clients. Certified Financial Planners (CFPs) are also required to as a fiduciary.

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Brokers

Brokers registered with FINRA are 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)

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Dually Registered Advisors

Dually registered advisors act as both an advisor and a broker. Since they are registered with both the SEC and FINRA, they are more likely to have conflicts of interest because they can switch legal obligations at any time.

Next time you see a financial advisor, ask the question:

“Are you a broker or dually registered advisor?”


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