To the unfamiliar, both professionals may seem the same, but there are differences that distinguish the two in ways that investors should pay very close attention to.


How are they Licensed?

RIAs are registered with the Securities and Exchange Commission (SEC) or their state securities regulator.


Broker-dealers are members of the Financial Industry Regulatory Authority (FINRA), which is regulated under the Securities and Exchange Act of 1934.


What standards are they held to?

Known as having Fiduciary Responsibility, an RIA is required by law to offer financial and investment advice that is in the best interest of the client, not benefiting themselves nor the firm. Broker-dealers are not fiduciaries.


Broker-dealers are held to a Suitability Standard when offering financial and investment advice. This means that their advice must be suitable for the client’s needs at that particular time. The suitability standard is less stringent than the fiduciary standard in terms of the advisor’s obligation to make recommendations that are in the client’s best interest.


How are they compensated?

RIAs are paid a flat fee, a percentage of their Assets Under Management (AUM), or an hourly fee.


Broker-dealers receive most of their compensation through commissions, based on the investment products they recommend and sell.


*There is also the hybrid advisor who conducts business with clients on both a fee-based and commission-based compensation structure.


Who Should You Choose?

In deciding which type of financial and investment advisor you should choose, consider this: do you want to receive advice that is objective and based solely on what is best for your situation? Or do you want to receive advice that could be influenced, at least in part, by how much money the advisor will make based on the recommendations?


The only way to ensure that the recommendations you receive from your advisor are total, 100% unbiased is to work with an RIA. As a fiduciary, an RIA must offer financial and investment advice that is based on your best interest — not on his or her compensation.



The commentary on this website reflects the personal opinions, viewpoints and analyses of the Safe Harbor Asset Management, Inc.’s employees providing such comments, and should not be regarded as a description of advisory services provided by Safe Harbor Asset Management, Inc.’s or performance returns of any Safe Harbor Asset Management Inc.’s Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Safe Harbor Asset Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.