What are the differences between brokers and investment advisors?
A. While the differences between brokers and investment advisors are blurring as brokers and brokerage firms attempt to morph themselves into advisors, some basic distinctions remain. One important difference is in the nature of the client relationship. Because brokers typically are paid on commission, they tend to be transaction-based; in other words, if there are no trades, they don’t get paid. Yet trading isn’t always in the best interests of the client. Advisors, on the other hand, are often paid a fee to manage the assets of the client. Therefore, there is a closer symmetry between the interests of the client and the advisor. Also, advisors tend to be independent, and therefore are free to select any strategy or product that will meet the disparate needs of each client. Brokers sometimes are pressured to sell in-house products or recommended particular securities. Finally, advisors often look at the entire financial picture for the client, while the brokerage relationship is usual
