Federal securities laws recognize two types of providers—investment advisers, who are in the business of giving advice about securities, and
brokers, who are in the business of buying and selling securities on behalf of
are fiduciaries. This means that they are required by law to put your interests ahead of theirs at all times by providing advice and recommending investments that they view as being the best for you.
• Investment advisers also are required to provide up-front disclosures about their qualifications, what services they provide, how they are compensated, possible conflicts of interest, ownership and affiliations, and whether they have any record of disciplinary actions against them.
• Investment advisers are regulated directly either by the U.S. Securities and Exchange Commission (SEC) or by state securities regulators primarily based on the amount of assets they manage.
are generally not considered to have a fiduciary duty to customers, although this standard may apply in certain circumstances. Instead, brokers are required to know your financial situation well enough
to understand your financial needs, and recommend investments that are suitable for you based on that knowledge.
• Brokers are not required to give the same up-front disclosure about conflicts of interest and ownership as provided by investment advisers.
• In addition to being regulated directly by the SEC and by state securities regulators, brokers are subject to regulation by the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization.
are not separately regulated as planners. Instead, their regulation and the level of responsibility they owe customers depend on the services they provide.
• Financial planners providing investment advice must be registered or licensed as investment advisers and are subject to a fiduciary duty. Those
who sell products must be registered or licensed representatives of brokers.
• Some financial planners perform other activities that do not involve securities and are not regulated under laws governing either investment advisers or brokers.