Is a Stockbroker a Real Financial Advisor?

No, they are not. Then why is there so much confusion? It starts with stockbrokers telling investors they are financial advisors. They make this false claim because they know most investors do not want salesmen investing their assets. Their solution is to masquerade as financial advisor to reduce sales resistance. The result is confused investors and some very happy stockbrokers who make a lot of money.

Is Deception Legal? 

Yes, it is legal. Stockbrokers can claim to be financial advisors with impunity. You can thank Wall Street for this one. It fights any type of regulation that negatively impacts revenue and profit. If stockbrokers told the truth, investors would not buy, and company revenues would decline. 

Who Wins When Investors Are Confused? 

Bad brokers and bad advisors win because confusion increases the odds investors will make the wrong decisions. For example, they unknowingly buy products that produce bad results, charge excessive expenses, and pay big commissions. They would not buy these products if they had all of the facts and an easy way to compare products.

Advice versus Recommendations

This is a source of confusion. Stockbrokers recommend investments. For example, they recommend you buy particular mutual funds. Real financial advisors provide financial advice. For example, they advise you to buy particular mutual funds. Does anyone really know the difference between recommendations and advice? No wonder people are confused. You will have to use other criteria to identify real advisors.

What About Licensing?

This is a differentiating characteristic. Stockbrokers have securities licenses (Series 6, Series 7) that permit them to sell investment products (securities, mutual funds, hedge funds). Real financial advisors have registrations: Registered Investment Advisor (RIA) or Investment Advisor Representative (IAR). These registrations permit them to provide financial advice and ongoing financial services.

Does Compensation Matter?

This is a differentiating characteristic. Stockbrokers only method of compensation is commissions that are paid by 3rd parties (mutual funds, hedge funds, insurance companies) or their broker/dealer. Financial advisors only method of compensation is one of the three types of fees: Asset-based (% of assets), fixed, or hourly.

Products versus Services

This is another source of confusion. Money management is a service, but a packaged money management service (mutual fund), is sold as a product. Then there are real services that are not confused with investment or insurance products, for example quarterly performance measurement reports.

Roles are Important

Roles are a differentiating characteristic. Regardless of the title used by stockbrokers they are paid commissions to sell investment products. They are not allowed to provide financial advice or provide ongoing services (performance measurement reports). Financial advisors provide advice and ongoing services.

Jack Waymire worked in the financial services industry for 28 years before he left to found the Paladin Registry ( in 2004. This investor education website was based on the Principles in Jack’s first book: “Who’s Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor.” 
The Registry also has a free service that matches investors to advisors who meet Paladin’s minimum requirements for competence and trustworthiness.

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