Registered Investment Advisor vs. Stockbroker: What's the Difference?

You might think the terms are interchangeable, but the difference between a registered investment advisor and a stockbroker can be profound. When you're considering a professional to help manage your finances, it's important to know how they differ. With that in mind, here are several differences between a Registered Investment Advisor and a stockbroker.

Loyalty to the client. A registered investment advisor has a professional obligation to his or her clients. Stockbrokers have a responsibility to their firms.

Adherence to standards. Investment advisors are legally compelled to abide by the rules that obliges them to act solely in their clients' best interests in a fiduciary capacity. Regulations for stockbrokers only require them to adhere to a suitability standard..

Documentation requirements. A "registered" investment advisor must register with either the Securities and Exchange Commission or with state securities commissions.

Commission vs. Fee-Based. An investment advisor is generally paid a flat fee or a percentage of assets under management by his clients for his work. Many stockbrokers are paid a commission when their customers buy or sell certain investment products or securities through them.