Pick Your Protagonist: Finding An Advisor Who Acts In Your Best Interest

Zoe Team

Oct 21, 2020

5 min read

A financial advisor reviewing a plan with two clients at a table

Key Takeaways

Always choose an advisor who acts as a fiduciary for your best interests.
Brokers and wealth planners have different legal standards for advice.
Transparency in fees and incentives is critical for a healthy partnership.

Frequently Asked Questions

How do I know if an advisor puts me first?

Look for a fiduciary advisor who is legally obligated to act in your best interest, rather than someone who prioritizes product commissions.

What is the difference between a broker and a planner?

Brokers often focus on selling products, whereas a dedicated wealth planner creates comprehensive strategies tailored specifically to your financial goals.

What should I ask a potential advisor?

Ask about their fiduciary status, their fee structure, and how they are compensated to ensure their incentives align with yours.

Pick Your Protagonist: Finding An Advisor Who Acts In Your Best Interests

The right qualified wealth planner has your best interest in mind. Brokers often blur the lines between what’s best for you or for them.

If the wealth management world were a movie, the qualified and interest-aligned financial advisor would be the protagonist, while the broker would be their foil. What qualifies a financial advisor to earn the leading role? Well, when a financial advisor is sitting on your side of the table, like a doctor taking an oath, they promise to act in your best interest. Equally important, qualified financial advisors are not selling you a product, they are there to provide sound financial advice. The protagonist is in search of the best outcome, providing holistic advice, while their foil is seeking to achieve their own motive: to sell you a product that’ll earn them a commission.

While a broker can also technically claim to act in your best interest, some find loopholes in the system to get what is in their best interest. An example of these loopholes may occur when a broker tries to get you to sign a best interest contract exemption.

Best Interest Advisors vs. Brokers

An example of an advisor acting in your best interest, such as those in the Zoe Advisor Network, is a Registered Investment Advisor (RIA) whose service revolves around providing sound financial advice rather than selling financial products. RIAs are regulated by the government’s Securities and Exchange Commission (SEC), while brokers self-police by being registered to the Financial Industry Regulatory Authority. Brokers only need to comply with suitability standards. Thus, they can collect a commission for the products they recommend as long as they are also providing “suitable” advice to their clients.

Fiduciary means the advisor is obligated to act in your best interest.

It’d be nice if potential clients could simply distinguish between an interest-aligned (or fiduciary) advisor and a broker, but those lines are often blurred. There are many financial advisors who play both roles by dually registering. As dually registered entities, known as hybrid advisors, they may have the privileges of acting as both brokers (receiving commissions) and fiduciary financial advisors (receiving fees). An advisor may say they are a “fiduciary,” but new regulations have made it all the more complicated to actually see behind the mask.

In an interesting plot twist, the SEC appeared to be holding brokers up to the same standards as advisors through the Regulation Best Interest rule, passed in June 2019. The Regulation Best Interest rule was introduced to help everyday investors by tightening the standards for brokers who sell investment products, as well as providing an updated interpretation of the duties of investment advisors. The Best Interest rule provides various stipulations to tighten standards, yet falls short due to its confusing nature regarding the fiduciary rule standard. The New York Times reported that investor advocates worry that even with the rule in place, it can be hard to decipher where loyalties lie.

While an important step toward a happy ending, the new rule suggests that both parties will need to act in the best interest of their client. Yet, how can this be when both sides define “best interest” differently?

An advisor may see “acting in your best interest” as sharing all information with you due to their fiduciary nature, while a broker might simply ensure you have what they deem “suitable.” This confusion of roles can allow a broker to call themselves a financial advisor but still act as a product salesperson.

Redefining The Meaning Of ‘Best Interest’

Along with the Best Interest rule, the SEC’s June 2019 rules passed a portion of its regulatory role to the industry by giving advisors the ability to define how they want to disclose their interests. Essentially it enables advisors to simply provide a relationship summary, in which the SEC expects brokers and advisors to discuss their vested interests and advising fees. In this way, the lack of explicit procedures may make it difficult for the consumer to determine whether the financial advisor they are looking to hire is working in their best interest.

In the latest update to the SEC Best Interest rule, as of June 30, brokers are now explicitly not allowed to call themselves “advisors.” While yet another step in the right direction, it doesn’t do much to relieve the fact that many advisors and advisory firms are dually registered. In such cases, it can be hard to tell whether your financial advisor is really a fiduciary because as a dually registered advisor, they are able to “switch hats” between being a salesperson and an advisor.

A hybrid advisor might claim to be a fiduciary, but that doesn’t necessarily mean they’ll be acting in your best interest all the time.

Picking Your Protagonist: An Advisor Who Acts in Your Best Interest

The minimum standards advisors have to meet are what makes their role in this movie unclear. So carefully read the contracts your advisors draw up for you. Make sure you understand that under the SEC’s rules package and the Regulation Best Interest rule, in order to follow the care, disclosure, conflict of interest and compliance obligations, a broker will always need to disclose their relationship with the products they are trying to sell you. That said, many do not do so transparently, particularly if dually registered. To avoid working with an advisor who claims they are a fiduciary but isn’t really working in your best interest, ask them if they are “dually registered.” Search for a financial advisor who clearly discloses how they are paid, as well as how their role is regulated.

Pick Your Protagonist: Finding An Advisor Who Acts In Your Best Interests

The right qualified wealth planner has your best interest in mind. Brokers often blur the lines between what’s best for you or for them.

Best Interest Advisors vs. Brokers

Fiduciary means the advisor is obligated to act in your best interest.

Redefining The Meaning Of ‘Best Interest’

A hybrid advisor might claim to be a fiduciary, but that doesn’t necessarily mean they’ll be acting in your best interest all the time.

Picking Your Protagonist: An Advisor Who Acts in Your Best Interest

Disclosures: Zoe Financial, Inc. ("Zoe Financial") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Zoe Financial provides investment advisory services and access to independent registered investment advisers through its platform. The information provided by Zoe Financial is for educational and informational purposes only and should not be construed as personalized investment advice or as an offer to buy or sell any security. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results. Clients should consult with their own financial, tax, or legal professionals before making any investment decisions. The material presented by Zoe Financial is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Material presented has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Past performance is no guarantee of future results. Zoe Financial does not provide legal or tax advice, and nothing contained in these materials should be taken as legal or tax advice. SEC Registration does not constitute an endorsement of Zoe Financial by the SEC nor does it indicate that Zoe Financial has attained a particular level of skill or ability. The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be appropriate for all clients. Before making any investment, each investor should carefully consider the risks associated with the investment, as discussed in the applicable offering memorandum, and make a determination based upon their own particular circumstances, that the investment is consistent with their investment objectives and risk tolerance. Lower expenses do not guarantee better investment performance. Certain information contained herein may constitute forward-looking statements. Due to various risks and uncertainties, actual events, results or the performance of a fund may differ materially from those reflected or contemplated in such forward-looking statements.

Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.

The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.

Explore the Zoe Wealth Platform with AI

Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.
In certain situations, you may be required to disclose that the content was “generated by AI.” Please confirm any specific disclosure or labelling requirements with Compliance.

(646) 680-9244

support@zoefin.com

666 Third Ave, 6th Floor
New York, NY, 10017