Financial Advice and Registered Investment Advisors


Crain’s Chicago Business recently published an AP story that commented that Goldman Sachs is “arguably the most storied investment bank on Wall Street and has been compared to a money-sucking vampire squid called the evil empire of finance.” A few weeks ago, one of Goldman’s directors resigned through a New York Times op-ed, accusing the bank of losing its moral fiber and putting profits ahead of customers’ interests.

These accusations are no surprise for Registered Investment Advisors (RIAs) such as myself. We have been getting clients who have felt fed up with their brokers for years. Most of these clients have money invested in products that generate big fees for the brokers and their firms and result in tiny returns for clients. In addition, these products underperform relative to their peers. As a matter of fact, ask any 10 RIAs who their best clients are. Nine out of 10 will tell you they are clients who had previously worked with a brokerage firm. These people feel so grateful that we are not ripping them off.

You would think that anyone who manages money for others has a fiduciary responsibility to put their clients’ interests first. That is not correct. A broker, also called registered representatives, account executives, financial advisors or wealth managers, only has to provide “suitable advice” for a client, which means it does not have to be the “best advice” in the client’s interests.

A Registered Investment Advisor is first a fiduciary, and second, he or she must follow a much higher standard, where he or she is required to put the interests of clients ahead of his or her own. Unlike a broker, the RIA must provide the “best” advice to a client.

Anyone who works for a brokerage firm or broker affiliated with a bank or insurance company (as most are) is not a fiduciary and cannot be even if they wanted to, as a broker must place the interests of a broker-dealer before the interests of the broker’s clients. Another way to tell if an advisor is a broker or RIA is to ask if he or she is series 7 registered. If the answer is yes, then he or she is most likely a broker-dealer.

Ultimately, when you compare a broker and a Registered Investment Advisor, the potential major impact is on the quality of your portfolio investments and hence your retirement future.

Disclaimer: The views expressed in this article are the opinions of the author and should not be interpreted as individualized investment advice. Investment objectives, risk tolerances and the financial situation of individual investors may vary. Please consult your financial and tax advisors before investing.

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Susan Carr-Templeton

About Susan Carr-Templeton

Susan Templeton is the founder of Stafford Wells Advisors, a wealth management firm serving individuals, families and businesses and advising workplace retirement plans. Stafford Wells was founded in 2008 with the mission of delivering independent, complete, unbiased investment and planning advice, free of any conflicts of interest. Susan Templeton has more than 20 years experience in investment management. She received her B.S.B.A. degree in marketing from the University of Denver and her M.B.A. from the University of Chicago. Susan is a trustee for the Advocate Foundation where she chair’s the Planned Giving Committee and is a member of the Investment Committee. Susan serves on the investment committee for the Visiting Nurse Association (Chicago) and is a former trustee of the Village of Oak Brook Police Pension Plan.