You choose: Fiduciary vs. suitability standards of care
There are two very different standards of care, when it comes to financial professionals: “Fiduciary” (registered investment advisors, regulated by the SEC/Securities & Exchange Commission) and “suitability” (brokers, “self-regulated”). Below is a condensed version of a Washington Post article that summarize it well:
Fiduciaries have a much stricter duty and legal obligation than do those who operate under suitability rules. Investors rarely come out on top when a self-regulating entity is involved… Investors have three problems with the suitability standard:
1. It favors the brokerage firm and its employees over the investor.
2. It costs much more than services provided under other standards. (“…brokers charge from 5 to 10 times (or more) what an investment adviser will charge per account”).
3. It creates an inherent conflict of interest between the adviser and the investor [regarding revenue maximization].
The suitability standard serves more of a public-relations role for brokers than a protection function for investors. Any mention of the word “fiduciary” generates a furious lobbying campaign by Wall Street. That ought to give you an idea of exactly how loose and lucrative the suitability standard is.
When seeking out advice, do yourself this favor: Find an adviser who is legally obligated to put your interests first. When you are retired and living comfortably off of your investments, you will thank me.