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Brokers vs.
Investment
Advisers

There are two primary types of individuals in the investment business: brokers and investment advisers. The differences between the two are often shocking to many individuals who have started the process of researching the best person to handle their hard-earned money. Perhaps the biggest difference between the two is the standard of care they must provide the client. Investment advisers are held to a fiduciary standard of care, which is the highest standard of care an investment professional owes to the client. Brokers are not held to such a high standard.

What’s in a name?

Given the stark contrast between the standard of care mandated by investment advisers and brokers, it is not surprising that many investors will attempt to seek out a fiduciary investment adviser to manage their money. However, it is often difficult to spot brokers because of the titles under their names. Instead of seeing ‘broker’ listed as a broker’s job title, you are likely to see more ambiguous titles, such as ‘wealth manager,’ or ‘financial planner.’ Don’t be fooled! In fact, most people who use the terms ‘wealth manager’ or ‘financial planner’ are actually brokers. Unfortunately, the only way to discover if someone is held to a fiduciary level of care is to ask. However, even if a person states he/she is acting as a fiduciary – be sure to get it in writing. If an investment professional refuses to state in writing that he/she is held to a fiduciary level of care, you should take your money elsewhere.

Click below to hear Dr. Lach’s thoughts on finding the right investment professional.

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Lach Financial is a fee-only Registered Investment Adviser dedicated to working hand-in-hand with its clients to achieve success through the science of investing.

Contact Professor Lach

Patrick Lach, Ph.D., CFA, CFP®
Investment Adviser Representative
3046 Breckenridge Lane, Suite 202
Louisville, KY 40220

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502.295.7887
plach@lachfinancial.com

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