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The Fiduciary Role: Clearing the Air

The Fiduciary Role: Clearing the Air

by J. Harold Williams

In this paper, we delineate and explain the differences (and practical implications) between two types of financial advisors: 1) a registered representative of a Wall Street brokerage firm, and 2) an independent investment advisor or wealth manager acting in a fiduciary capacity.

First, we will provide a brief explanation of the legal standard of care, which currently applies to these two types of financial advisors. A brief overview of the history and evolution of efforts to set standards of care for those rendering investment assistance to clients is provided as additional background. This is followed by a discussion that contrasts the roles and compensation methods of registered representatives versus investment advisors. Finally, we illuminate the conflicts of interest faced by investment professionals functioning in each of these roles.

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