The Difference Between a Wealth Management Firm and a Brokerage Firm – and Why It Matters to You

In an ever more complex world, people who enjoy a high net worth have much to be thankful for– but also much to manage.  Their desire to find financial expertise covering more than just investments has been one key factor driving a shift from reliance on stockbrokers to relationships with wealth management firms.  But what exactly are the differences between wealth managers and stockbrokers?

Wealth Management is For Your Entire Financial Life – A Broker is for Investments

As a recent article in Forbes[i] said, “The job of fiduciary wealth managers is to do what you would do if you had their time and expertise. First, they get to know you. Then they service your requests. And lastly they learn to anticipate your needs.”  In our experience as a Cincinnati wealth advisor, we’ve found that our clients’ comprehensive needs can best be served by offering a team with experience in:


  • Financial Planning:  Taking the long view with input from many sources, to both grow and protect your wealth.


  • Tax Planning:  Ensuring you’re getting all the tax advantages the law allows.


  • Retirement Planning:  Bringing experience to the portion of a financial plan that must see you through your post-earning years.


  • Estate Planning:  Taking the worry and hassle (for you and your heirs) out of passing your wealth along to future generations.

The best stockbrokers, on the other hand, are primarily experts in investments, making recommendations for you to choose from, but not typically acting as consultants on your broader range of financial concerns.  It is also important to note that, as registered representatives of larger firms, those recommendations may be limited to the investments and services offered by those firms. Finally, you should be aware of the potential conflicts of interest driven by differing compensation approaches:  many see the fee-based arrangements charged by wealth managers as favoring impartiality of recommendations, while the commissions paid to brokers have often been pointed to as creating conflicts of interest.

Wealth Mangers Have A Legal Responsibility to Look After Your Best Interests – Brokers Do Not

The other critical distinction between wealth advisors (who are most often Registered Investment Advisors or RIA) and brokers (Registered Representatives) is in their fiduciary, or legal, responsibility to you, the investor client.  By law, an RIA, such as those at our wealth management firm, have a legal responsibility to put your financial interests ahead of their own.  Stockbrokers, however, are only required to offer products that are “suitable” for their clients.  Noted financial author Terry Savage explained it this way[ii]:

Brokers and other financial salespeople do not have to follow the Fiduciary Standards required of Registered Investment Advisors. Those six fiduciary standards require the advisor to:

  • Serve the client’s best interest
  • Act in utmost good faith
  • Act prudently — with the care, skill and judgment of a professional
  • Avoid conflicts of interest
  • Disclose all material facts
  • Control investment expenses”

Real Differences, Real Choices

Comprehensive consulting or investment-only recommendations?   Fee-based or commission-driven? Legally ensured protection of your interests… or not?  It’s crucial that you understand the differences before selecting a financial resource – and we will be glad to answer any questions you have.




Recent News

Income Tax Breaks for Homeowners

The U.S. government has a long standing history of including incentives in the income tax code to encourage home ownership.  This is because of the positive impact home buying has on the economy - consumer spending makes up over two-thirds of the U.S. economy.  Purchases of homes, especially new construction,…

Read More

Corporate Debt Looms Large

Corporations have had the wind at their backs with low interest rates. This lead to record levels of corporate debt issuance, which has surpassed 45% of GDP. There are now over $4trillion in corp. bonds due over the next 5 years. Companies will be forced to refinance at high rates…

Read More

401k: Understanding the Ins and Outs of the Most Popular Retirement Tool

Whether you’ve just started a new job, or you’ve been at one for years, odds are that your employer has given you the option to participate in an employer-sponsored 401(k) retirement plan (“401k”).  The 401(k) plan is one of the most popular retirement tools for working individuals.  Despite its popularity,…

Read More