In the financial services industry, professionals have many different titles. Many investors look to retirement advisors for help with planning and investing. While the concept of a “retirement advisor” may seem like a straightforward concept, it can be more complicated than many understand. A retirement advisor’s title—even a simple spelling difference—can provide key insights into how he or she operates.
Some titles reflect different areas of expertise, while others signify that the adviser is required by law to place your interests above their own. Still others are just job titles designed to sound sophisticated, but have no special legal requirements or credentials attached.
Once you know a financial representative’s official title, it’s time to match the title to the services being delivered. These distinctions can be subtle—an adviser (spelled with an “e”) versus an advisor, for example. Despite being separated by only one letter, these titles can imply vastly different responsibilities. These responsibilities—and their differences—may stem from how a professional receives compensation and their business practices.
Adviser (spelled with an “e”): This spelling can indicate the financial professional is a Registered Investment Adviser (RIA), or works for an RIA. An RIA’s primary business is providing investment advice and plans. RIAs don’t generally have incentives to sell products to clients just to earn commissions because they typically charge a fee based on assets under management. This means their main incentive is to grow their client’s investments. The Securities and Exchange Commission (SEC) also holds RIA’s to the fiduciary standard on all account types, meaning RIAs must act in their clients’ best interests at all times. We’ll discuss the fiduciary standard at length in the following section.
Advisor (spelled with an “o”): This spelling can indicate the financial professional is a representative of a broker-dealer. These representatives, who may call themselves Investment, Retirement or Financial Advisors, often have two main functions. They may buy and sell securities on behalf of their customers (as the broker) and for their firm’s own account (as dealer). Sometimes they do both. While some may charge an ongoing fee, they may also earn commissions from client trades. These advisors are held to a different standard from RIAs. Rather than being required to always put their clients’ interests above their own, they are generally only required to recommend investments that are “suitable” for their clients. This means if an advisor is choosing between two investments that are equally “suitable” for her client, she wouldn’t be violating her duty if she chose the one that was more expensive (and perhaps provided her a greater commission). Higher-commissions on certain products such as some types of annuities may incentivize advisors to sell these products in order to earn more money for themselves.
During the 1990s’ roaring bull market, it became popular for broker-dealers and their representatives to call themselves “advisor” with an “o” instead of an “e.” This blurred the lines between broker-dealers and RIAs, making it more difficult for investors to tell the difference.
With that in mind, someone using the title “retirement advisor” may be a broker-dealer rather than an RIA. RIAs will more commonly use the title adviser with an “e,” because this title implies that they conform to different regulations than brokers. While nothing is inherently wrong with the “retirement advisor” title, it’s important to know the different standards these titles operate by.
RIAs and their representatives must follow a standard known as the Fiduciary Duty Rule. They must always put their clients’ interests ahead of their own, disclose any known conflicts of interest, take into consideration the client’s entire financial situation and offer advice that is most appropriate for the client.
In the past, the fiduciary standard solely applied to RIAs, while broker-dealers were held to the suitability standard. This meant broker-dealers weren’t required to disclose conflicts of interest, except in some limited circumstances, as long as their suggestions suited the client’s needs. But, the Department of Labor released clarification to the regulations. Tentatively starting in 2019, the fiduciary standard could begin to apply to broker-dealers and retirement accounts. This includes individual retirement accounts (IRAs) and retirement plans. While there is still uncertainty about how the rule will or will not be enforced, broker-dealers may still be bound only by the suitability rule in regards to taxable investment accounts. Broker-dealers may also be able to avoid being held to the fiduciary standard in retirement accounts if they have the client sign what’s known as a Best-Interest Contract exemption.
The law was designed to help enhance protections for investors, but remember: A law on its own can’t guarantee you’ll receive advice in line with your interests. As an example, the disgraced and now-imprisoned Bernie Madoff was an RIA with fiduciary responsibility, and that didn’t ultimately help his clients. Even if you are working with a retirement advisor held to the fiduciary standard, it is still important for you to do your homework and find one that deserves your trust. Look for a professional who does not retain custody of your assets. Your assets should be held at a third-party custodian unaffiliated with the professional. This helps keep account activity transparent and makes it harder to commit fraud. Also make sure to thoroughly read all the disclosure information a prospective advisor provides. RIAs must provide you with what’s known as a Form ADV. This will detail the adviser’s potential conflicts of interest, a history of the advisers’ business dealings and an explanation of the processes in place to minimize the impact these conflicts may have on clients. Ultimately, it’s up to you to make sure you can trust the person and company you choose to help you with your retirement savings.
Depending on the title a retirement advisor uses, it may be difficult to tell whether he or she is regulated by the Financial Industry Regulatory Authority (FINRA), the SEC or neither. Some professionals are allowed to provide general educational advice on investing relative to a person’s age or income, but not specific security or asset advice.
For a better sense of what some of these other titles might look like, FINRA keeps an extensive list of popular ones. Professional designations such as “Certified Investment Management Consultant” are common, but the effort needed to achieve different designations can vary greatly. Be sure to carefully analyze the organization and processes tied to either the title or credential touted by anyone you’re considering hiring. The key takeaway is that people with various certifications or job titles may not be subject to the same rules as broker-dealers or RIAs (unless they have also earned these titles), so be careful in understanding their limitations.
If you decide to work with Fisher Investments, you can count on our commitment to putting your interests first. We have been a Registered Investment Adviser since our firm was started in 1979, and we have always taken our commitment to the fiduciary standard seriously.
Our fee-only structure reinforces our commitment to reducing potential conflicts of interest. Our fees are transparent, thoroughly explained to clients up front and are structured to align our interests with yours. We don’t get paid commissions for making trades on our clients’ behalf.
If you’re interested in learning more about our services or the benefits of choosing Fisher Investments as your adviser, you can request a meeting with one of our experts. We also encourage you to download any of our helpful retirement and investing guides to assist you in understanding the process we use to create personalized retirement plans to help you on the path to your long-term goals.
 Source: Federal Register, Definition of the Term “Fiduciary”; Conflict of Interest Rule - Retirement Investment Advice, https://www.federalregister.gov/documents/2016/04/08/2016-07924/definition-of-the-term-fiduciary-conflict-of-interest-rule-retirement-investment-advice.