Advisors vs Brokers

WHO IS BEST TO MANAGE YOUR MONEY? THE FIGHT ADVISORS (E BROKERS Investors want peace of mind that their assets are in good hands. Often, that involves seeking a financial professional for advice and services. But, inves- tors beware: not all professionals offer the same type or quality of services, and the labels can often be confusing. Here we pit two types of financial professionals-traditional securities brokers and individual registered investment advisors (RIAS)-against each other to answer the question: which one is better for you? ROUND WHO'S IN YOUR CORNER? 1 My firm may I look out for you. incent me to put its interests ahead of yours. RIAS Brokers Brokers are typically not RIAS have a legally binding fiduciary obligation, meaning they must put their clients' bound by fiduciary obligations, may put their interests ahead of their own personal or firm's interests and disclose any potential ahead of their clients, and conflicts of interest. may have conflicts they don't disclose to you. RIAS are generally in business to sell advice. Brokers are generally in business to sell products. ROUND 1 WINNER: RIAS ROUND FOLLOW THE MONEY 2. Iam generally paid when I charge for advice and/or ongoing management. you buy or sell product. RIAS Brokers RIAS typically charge fees as a percentage of assets under management (fees typically run from 1 percent to 2 Brokers typically are paid by commission, and those commis- sions vary both by type of asset and by transaction volume. This percent). The amount you means you may run the risk of paying for assets with high built-in fee structures and for "churn, which is excessive trading to generate commission income. pay doesn't go up with higher transaction volume, Some offer asset-based fees, which are typically higher than RIAS and may not avoid the conflicts of interest." Fees and expenses have a direct impact on portfolio performance. With RIAS you know what you're getting, while brokers require constant monitoring to detect unnecessary expenses. ROUND 2 WINNER: RIAS ROUND PLANNING FOR LONG-TERM SUCCESS 3. Strategic advise is the key service An overall investing strategy is something I may charge extra for. RIAS Toffer. Brokers RIAS typically provide Brokers may offer planning "strategic" advice focused on and related services like asset allocation and rebalancing, but that is usually not part of their standard agreement and asset allocation to meet your long-term objectives, risk tolerance, and special circumstances. They take an active role in helping you may cost extra if offered. structure and manage an integrated portfolio of different asset types. RIAS are more portfolio-focused, whereas brokers tend to be more product-focused. ROUND 3 WINNER: RIAS ROUND THE PRICE OF ADMISSION Itypically only work with people who have a high-net-worth. You don't have to be wealthy to work with me. RIAS Brokers RIAS generally require a Brokers generally have lower minimum thresholds than minimum investment of RIAS, though the securities firms where they work may $500,000, though some will accept clients with less, have threshold requirements for opening a brokerage account. RIAS historically have serviced a more high-end clientele, which may put them out of reach for the typical individual investor. ROUND 4 WINNER: Brokers When deciding who is best to look after your money, the first thing to verify is that your provider's interests are aligned with yours. That argues for the RIA model, but depending upon the level of wealth you have, it may be that you are the best person to take on the role. With the help of powerful new online tools offered by affordable online RIAS, investors at all levels of wealth can take more control, be more confident and better informed in managing their investments, and can greatly improve their long-term financial well-being. After all, nobody is impacted by investment decisions as much as the person whose name is on the portfolio. SOURCE: JEMSTEP.COM jemstep