Fiduciary vs. Broker – What’s the difference?

In the past few months, we have seen a rise in use of popular “designations” with the word Fiduciary in the title and I realize this may lead you to believe that someone who calls themselves, for example, an “Accredited Investment Fiduciary” is, in fact, acting as a Fiduciary, but that is not necessarily the case. 
Unfortunately, this designation does not require that you get paid as a Fiduciary or that you set up your firm as a true Fiduciary. It simply means you have paid for a course, done online training, passed an exam and now you can use the title. 
Brokers have traditionally been paid commissions for pushing proprietary products or funds they often get rebates or bonuses from certain sales, driving their agenda towards in-house investment options. 
To help clarify, one of the main identifying differences between a Fiduciary and a broker is how they get paid. Brokers are paid a commission for the sale of a security and a Fiduciary gets paid to offer investment advice. Registered Investment Advisory Firms, Registered Investment Advisors and Investment Advisor Representatives are paid a fee to offer investment advice. A Registered Invest Adviser is legally bound to work in your best interest. Under the Investment Advisers Act of 1940, registered investment advisers are held to a fiduciary standard of care. By law, they must ensure that each investment recommendation that they make is in your best interest.   
Meaning that, unlike a Broker, Fiduciaries do not have a vague commission schedule where they get paid different levels of commissions for various products. Fiduciaries are paid a level fee without financial incentives to offer one portfolio or product over another. Fiduciaries list all of their fees and these are transparent to the consumer. 
A good way to know if someone is getting paid a commission (aka a Broker) is if the marketing materials, brochures or website for the financial professional lists things such as a Broker Dealer, or if they are a Registered Representative. If they are affiliated with a Broker Dealer or they are a Registered Representative they are paid commissions. 
At the same time, if they do not offer securities and they offer only insurance based products they cannot be a Fiduciary by definition. So all you have to ask is: “Are you licensed to offer anything other than insurance products?“.
So a good question to ask someone who offers securities if you are not sure is, “Do you get paid a commission to buy or sell Securities?”.
Re-cap on questions to ask to see if you are likely working with a Broker: 
1) Are you a Registered Representative?  
2) Do you have a Broker Dealer affiliation? 
3) Do you or your firm get paid a commission on the sale or purchase of a security?   
3) Do you offer insurance only solutions or can you offer securities?  
Luckily for all of us today, Brokers and agents who provide “advice” or recommendations that are fraught with conflicts of interest can be exposed through technology and will hopefully be exposed through their actions or lack of them. 
People come into my office on a daily basis and say they have “financial stuff” they have purchased or assimilated over the past 10-15 or more years. Most of the time these things they have aren’t assembled into a plan or a strategy where they each dovetail with the next. It’s sort of like the financial junk drawer. That is a good measure of working with brokers, they sell stuff
We believe that you cannot truly be a Fiduciary if you are not helping the clients or families you serve by offering complete planning that addresses the top risks people face retiring today and helping create a comprehensive strategy.
If you only offer insurance products like annuities, life insurance, long-term care, etc., then how can you truly do complete planning? You’re a salesperson selling insurance. Conversely, if you only offer stocks bonds and mutual funds, how can you offer a comprehensive approach? We believe a comprehensive look and planning approach can only be done if all aspects from investments to insurance, taxes and estate planning are all done in conjunction with one another – because each decision and piece affects the others.    
At the end of the day, I am confident that intelligent consumers who are looking for a comprehensive approach with a Fiduciary will know if they have found a financial professional who can be a true partner for their retirement by gauging the level of transparency involved in their process, their disclosure of all data relating to important decision making and how much the professional involves the client in the education and decision process, as opposed to selling them something. 
Ultimately, look beyond just “designations” and find a true partner for your future. Actions speak volumes. 


  1. Dan Gansz on March 9, 2018 at 2:26 pm

    I wish I knew you 25 years ago. This is great.

  2. Bill Edwards on March 9, 2018 at 7:50 pm

    I have dealt with brokers and I am glad for the difference in working with you! I really feel that you look after my interests.

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