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30 August 2011
How many people know the difference between a stock broker and an investment adviser? Not many. From the public’s point of view, they are one in the same.
While these two types of professionals perform many similar services, one major difference is in their standard of care. Stock brokers are held to a suitability standard which states that the products they sell must be deemed suitable for the customer. On the other hand, investment advisers must abide by the fiduciary standard which requires them to put their clients’ interests first.
The fiduciary standard includes both a duty of care and a duty of loyalty. Collectively, and generally speaking, these duties require an investment adviser to act in the best interest of the client, and to provide full and fair disclosure of material facts and conflicts of interest (www.sifma.org).
A letter to the editor in the "New York Times" on August 26th, 2011 explains this situation in more detail: http://www.nytimes.com/2011/08/27/opinion/a-standard-for-brokers.html?_r=1.
Is your “financial advisor” working for you under the suitability standard or as a true fiduciary?
"P R E P A R E T O R E A C H Y O U R G O A L S"
