When you want financial advice, it’s important to know whether you need a broker or a fiduciary. These two types of professionals have different purposes and legal obligations.
- buy and sell financial assets
- usually earn a commission on purchases and sales
- often have a deep knowledge of the products they deal in
- must give advice they believe is suitable to the client, but are not required to promote the client’s interests over their own
Fiduciaries (such as Registered Investment Advisors):
- provide advice and guidance
- usually charge a fee for their services
- must promote and protect their client’s interests over their own
- should disclose all material facts about compensation and conflicts of interest
So you might say that a broker is a financial middleman, a fiduciary a consultant.
Which is better?
It depends on the situation. If you are looking to buy a certain type of financial product, such as life insurance, that you are familiar with and confident about, using a broker could save time and money. A broker might provide you the detailed expertise needed to make a final choice from alternatives. On the other hand, if you need advice on whether you even need a certain product, such as long term care insurance, then a fiduciary would be the better professional to talk to.
In the end, brokers and fiduciaries are simply different. Neither is best in every situation. But understanding all the nuances of the difference can be confusing. If you’d like to discuss it in more detail, contact Jim Waters at 713-964-4028 or email@example.com.