Blog   Tagged ‘advisor’

Investment broker vs. investment advisor: who should you choose?

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What’s the difference? Which is better?  

Let me try to clear up some of the confusion. In the investing world, there are two standards of care that can be given by financial service providers: the fiduciary standard and the suitability standard. Before we look at the differences between brokers and advisors, let’s first define the two standards.

The fiduciary standard – Your financial service provider must advise you without conflicts of interest and for your sole benefit as the client they serve, always putting your interests above their own. The fiduciary standard of care was established by the Investment Advisors Act of 1940.

The suitability standard – Your financial service provider must make recommendations consistent with your best interests and in line with your investment objectives and tolerance for risk. Suitability rules are established by the Financial Industry Regulatory Authority (FINRA).

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Some believe that there should be a uniform standard of care. In the wake of the 2008 financial crisis, legislators in Washington D.C signed the Dodd-Frank Act into law in July 2010. Part of the act directs the Securities Exchange Commission (SEC) to study the need for establishing a new, uniform standard of care for the investment industry. To this day, multiple agencies, industry groups and regulators continue to debate what that standard should be, and there are plenty of arguments for and against a uniform standard. The debate has been going on for years with no resolution. Here’s why: there is not just one right answer.

On its surface, a uniform standard makes perfect sense. In reality, consumers of financial services may need a provider operating under either or both standards and many providers are able to act as both, depending on the needs of the client.

Now, let’s take a look at the difference between advisors and brokers.

Investment advisors

Investment advisors provide a fiduciary standard of care. They give advice on what to invest in and will typically charge a fee for their advice on an ongoing and fully-disclosed basis. It could be either a flat fee or a percentage of your investment assets. Investment advisors are regulated by the SEC and the states in which they do business.

Investment brokers and agents

Investment brokers and insurance agents provide a suitability standard of care. They sell financial products like stocks, bonds, mutual funds, life insurance and annuities. Brokers and agents typically charge a commission on the product they sell or are paid a commission by the product manufacturer. Investment brokers are regulated by FINRA and the states in which they do business. The states also regulate the insurance industry.

So which is better, broker or advisor?

Again, there is no right answer. For example, perhaps you need help with planning for retirement and have a nest egg to invest, but don’t have the time or inclination to invest the money. An investment advisor that can do the planning, choose investments, monitor your portfolio and make changes along the way may be a good choice for you.

Or, maybe you know that you want to buy or sell a stock, bond, mutual fund, buy life insurance, an annuity or even add gold or silver to your portfolio. A broker or agent can help you make the transaction.

Who should you choose?

Depending on your situation and needs, it could be one or the other or both. When searching for a provider, look for a person or firm by clearly communicating your needs:

  • your expectations for service,
  • asking what you will receive,
  • when you’ll receive it and
  • how much it costs.

Many financial firms can provide both brokerage and advisory services, so there are many providers to choose from with varying products, services and service levels. Like anything else you buy, shop around, ask questions and take your time to find the right fit.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.



UMB Private Wealth Management is a division within UMB Bank, n.a. that manages active portfolios for employee benefit plans, endowments and foundations, fiduciary accounts and individuals.  UMB Financial Services Inc * is a wholly owned subsidiary of UMB Bank, n.a. UMB Bank, n.a., is an affiliate within the UMB Financial Corporation. Banking and trust services offered through UMB Private Wealth Management, a division within UMB Bank, n.a.


UMB Financial Services Inc * is a wholly owned subsidiary of UMB Financial Corp and an affiliate of UMB Bank, n.a.

This report is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. Statements in this report are based on the opinions of UMB Private Wealth Management and the information available at the time this report was published.

All opinions represent our judgments as of the date of this report and are subject to change at any time without notice. You should not use this report as a substitute for your own judgment, and you should consult professional advisors before making any tax, legal, financial planning or investment decisions. This report contains no investment recommendations and you should not interpret the statements in this report as investment, tax, legal, or financial planning advice. UMB Private Wealth Management obtained information used in this report from third-party sources it believes to be reliable, but this information is not necessarily comprehensive and UMB Private Wealth Management does not guarantee that it is accurate.

All investments involve risk, including the possible loss of principal. This information is not intended to be a forecast of future events and this is no guarantee of any future results. Neither UMB Private Wealth Management nor its affiliates, directors, officers, employees or agents accepts any liability for any loss or damage arising out of your use of all or any part of this report.

“UMB” – Reg. U.S. Pat. & Tm. Off. Copyright © 2012. UMB Financial Corporation. All Rights Reserved.

*Securities offered through UMB Financial Services, Inc. member FINRA, SIPC, or the Investment Banking Division of UMB Bank, n.a.


Insurance products offered through UMB Insurance, Inc. You may not have an account with all of these entities. Contact your UMB representative if you have any questions.

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The Credit Conversation: Now is the time to talk with your private banker

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Personal lending was a completely different world just a few short years ago. With shifts in the financial landscape, economic uncertainty and low interest rates, this is a good time for you to talk with a private banker and create a financial plan for the future—and the conversation should start with the topic of credit.

What was best for a person five years ago may not be the right choice now. Markets shift, and it’s important to occasionally survey the financial landscape with your private banker and possibly prepare for new opportunities.

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  • Work with advisors, not transaction managers.
    Sound financial planning is built on strong relationships, not individual transactions. Those relationships are built on knowledge and trust. A private banker should be acting as your advisor so they can help you make decisions that fit both your short- and long-term goals. Advisors will focus on tomorrow’s financial decisions, not today’s transaction.
  • Don’t make credit decisions with blinders on.
    No financial decision should be made without knowing the overall financial picture. In a trustworthy banking relationship, your private banker works alongside an entire team of experts to determine the best lending solutions for areas such as investment, tax and retirement purposes while also taking into consideration the overall wealth and estate plan.
  • Create a customized credit plan.
    It’s important to understand all the options. The truth: most people don’t proactively manage the borrowing side of their personal balance sheets when they plan to purchase a luxury vehicle, a business or a second home. That may stem from not knowing all of the varied credit options available.

    A private banker can help you explore and customize lending solutions to match risk and best leverage your assets. This provides you with options that may extend beyond the ones commonly offered in the marketplace.
  • Prepare for the unexpected with a line of credit.
    As the old saying goes, the time to borrow money is when you don’t need it. For example, a line of credit can be an invaluable tool to help you prepare for the unexpected and manage your overall financial picture.Lines of credit can be used for a wide variety of purposes, including major ticket purchases, home improvements, education and medical bills. Additionally, lines of credit can provide you with peace of mind if and when unexpected expenses occur.

As you plan for your future, it’s important to talk with a professional who can ensure you are taking full advantage of the many credit solutions available to you while also providing you with advice related to your overall wealth plan.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.

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