Title Reform: Advisor (Fiduciary) vs. Broker (Non-Fiduciary)


(March 16, 2018)  There is a big difference between a full-time fiduciary (a “fee-only” advisor) and a part-time or non-fiduciary (“fee-based” advisors, dually-registered advisors, or brokers). “You shouldn’t be able to use the word ‘advisor’ – spelled with an ‘o’ or an ‘e’ – unless you are subject to the investment adviser fiduciary standard,” said Michael Piwowar, Commissioner of the Securities and Exchange Commission (SEC). The discussion about title reform within the financial services industry is gaining some legs, and it’s about time.


Title reform attempts to clarify the law that separates an advisor, who is held to a fiduciary duty, and a broker, insurance agent, or dually-registered investment professional who may operate under the lesser suitability requirement. The intent of title reform is to clearly differentiate the role of a client’s advisory partner. For years, investment professionals of all kinds have integrated the use of the term “advisor” into their titles, marketing materials, discussions with prospective clients, and even as part of the firm’s name. The Securities and Exchange Commission (SEC) is now bringing this discussion to the fore, hoping to limit confusion among the investing public about the legal obligation of their investment professionals. Currently, almost anyone can call themselves an “advisor”, even when they are not subject to the fiduciary standard under the Investment Advisers Act of 1940. Reserving the term “advisor” for independent, Registered Investment Advisors (RIA) is a commonsense way of delineating fiduciaries from brokers or salesmen.


There’s a reason a pharmaceutical rep cannot hold themselves out to be a doctor. Patients could be misled, believing their pharmaceutical rep is making a drug recommendation based solely on the patient’s well-being and health. Conflicts would be ever-present as the incentives of the pharmaceutical rep (to sell drugs) may run contrary to the patient’s goals (good health). The same is true of one’s financial health. Investors deserve the same clarity in determining whether the advice they receive is objective, or whether someone has hidden (or conflicting) incentives.


Sunrise Advisors is proud to be an independent, “fee-only”, Registered Investment Advisor. We have, and always will be, fiduciaries for our clients. In every sense of the word, we are advisors. We hope the SEC’s initial (and commendable) push toward title reform will not be thwarted by industry stalwarts, lobbying groups, or outside interests. Investors deserve true advisors.


<<<Back to News