In the investment ﬁeld, there are mainly two types of institutions that oﬀer ﬁnancial services. One are the investment advisors and the other are the broker-dealers. Both parties are held to diﬀerent standards while working with clients seeking ﬁnancial management. Investment advisors are bound by a ﬁduciary standard when providing investment advice, while broker-dealers are subject to a suitability standard when selling commissionable products.
Investment advisor representatives have a duty of loyalty and care, and are required to put their clients’ interests above their own. The investment advisor representative must do his or her best to make sure investment advice is provided using accurate and complete information. Avoiding conﬂicts of interest is pertinent when acting as a ﬁduciary, and it means that an advisor must disclose all potential conﬂict of interests to clients.
On the ﬂipside, brokers who sell commissionable products through broker-dealers may do so under the suitability standard, which means that the sale is permissible if it is believed to be consistent with the best interests of the underlying customer. Instead of having to place his or her interests below that of the client, the suitability standard only details that the broker-dealer has a reasonable belief that any recommended products are suitable for clients, in terms of their ﬁnancial needs, objectives and unique circumstances.
A key distinction in terms of loyalty, when selling products, the broker’s duty is to the broker-dealer he or she works for, not necessarily the client served. The suitability standard does not eliminate conﬂict of interests between a broker-dealer and underlying client.
The most obvious conﬂict is with fees; as long as the investment product is suitable for the client, it can be sold to the client. This can incentivize brokers to sell their own products ahead of competing products that may be at a lower cost. It is important to note that it is possible for an investment advisor representative to also be a broker of a broker-dealer at the same time. A representative who is both an advisor and a broker will provide advice under the ﬁduciary standard, while selling products through their broker-dealer under the suitability standard. For that reason, it is important to ask your ﬁnancial advisor all methods of their compensation.
UNITED CAPITAL prides itself in operating under the Fiduciary Standard.
United Capital Financial Advisers, LLC (“United Capital”) provides ﬁnancial life management and makes recommendations based on the speciﬁc needs and circumstances of each client. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained herein is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. Investment adviser representatives of United Capital may also be registered representatives of a Girard Securities (“Girard”), a registered broker-dealer, member FINRA/SIPC. United Capital and Girard are separate and unrelated companies.
United Capital Financial Advisers, LLC (“United Capital”) is an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization. United Capital does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances.
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