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Asset Preservation Advisors


State: GA

APA’s philosophy is to work closely with our clients to develop an in-depth understanding of their unique needs and objectives. We then customize a municipal bond portfolio that best meets their specific goals and needs. APA manages high quality municipal bond portfolios in four strategies: Short-Term, Intermediate-Term, High Income, and Taxable.

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Investors: Broker Dealers vs. Registered Investment Advisor

Millionaire investors prefer a full-service broker dealer to a registered investment advisor. Explore the pros and cons.

| BY Adriana Reyneri

Millionaire investors are significantly more likely to work with a full-service broker-dealer than a registered investment advisor, according to Millionaire Corner research that shows close to half of affluent investors lack a written financial plan. 

Eighty-four percent of Millionaires use some type of financial advisor, and they prefer a full service broker-dealer (37 percent) to a registered investment advisor (8 percent), according to a wealth study completed in the third quarter of 2011. What advice are these wealthy investors receiving?

More than 60 percent of Millionaires say they their advisor has advised them to diversify assets away from a concentrated position, but only 52 percent have worked with an advisor to create a written financial plan or discussed saving for retirement. Even fewer have discussed such holistic issues as planning for long-term care (26 percent), establishing an estate plan (25 percent), or philanthropic giving (7 percent). (Our research shows that the cost of health care is a top financial concern of wealthy investors.)

A registered investment advisor tends to charge clients fees based on the percentage of assets under management, though a minority charges hourly or fixed rates, according to the U.S. Securities and Exchange Commission, which regulates the role of a registered investment advisor. Most broker-dealers - largely overseen by the Financial Industry Regulatory Authority -are compensated through commissions paid for transactions.  A minority of financial professionals are registered as both a broker-dealer and a registered investment advisor.

According to the SEC, “The regulatory schemes for investment advisors and broker-dealers are designed to protect investors through different approaches.” A registered investment advisor is considered to be a “fiduciary” to his or her clients. A fiduciary has the duty to work in the best interest of his or her clients, and to put the clients’ needs foremost. The SEC explains that “included in the fiduciary standard are the duties of loyalty and care.” Broker-dealers are not bound to a fiduciary duty under federal law, states the SEC, but a broker-dealer is required to make suitable recommendations, and to disclose any conflict of interests to a client.  

The distinctions between a registered investment advisor and broker-dealer can be confusing to retail investors, according to the SEC. Many retail investors fail to understand the difference between the two standards of care and assume that both a registered investment advisor and a broker-dealer are required to act in the client’s best interests.  Regulators are currently considering a uniform fiduciary standard that would subject a full-service broker-dealer to the same fiduciary standards as a registered investment advisor.