Advisor vs. Brokers
Did you know that a financial advisor is regulated differently from a financial broker? When an individual is paid on a fee basis, that person is regulated as an advisor. When an individual is paid on a commission basis, that person is regulated as a broker. This fundamental difference and the confusion of the two is one of the sticky problems new SEC Commissioner Elisse Walter has to face.
Under Depression-era U.S. laws, brokers and advisors are subject to different regulations depending on whether they are paid chiefly through commissions or fees. Such dividing lines blurred as brokers, with the SEC’s encouragement, began touting advice and offering fee-based accounts to customers without being regulated as advisors.
Advisors objected, saying the SEC’s approach confused investors and hurt competition. When a federal court ruled that it had overstepped the law, the SEC approved stop-gap measures, but has yet to offer a long-term solution.
SEC Commissioner Favors Revisiting Controversial Issues [Dow Jones]