Investment adviser vs. broker: What's the difference?

People looking to build a financially secure future will necessarily look for the best possible advice on how to invest their money.

Experts in the investment industry come in two main varieties: investment advisers and brokers. While they may seem similar, their roles are different. Understanding those differences is crucial to developing a solid financial strategy.

Here is what to know about hiring an expert to help with personal investments.

The reasoning behind hiring an investment adviser or broker is clear, according to Krista Zipfel, CFA®Director of the global GRC firm, ACA Group.

"Most investors do not have the time or expertise to effectively manage their own money or plan for their retirement," said Zipfel. "I’m not my own doctor, and I’m not my own attorney. Similarly, investors’ long-term financial health can be greatly enhanced through the expertise of an investment adviser."

Zipfel’s 25 years in the financial services industry have shown her the biggest benefit of using investment advisers: They are emotionally separated from the money they’re investing. This allows them to take negative market news in stride rather than reacting to it with impulse buying and selling which could poorly affect long-term financial returns.

Investing strategies will vary between investment advisers and brokers, which is why it’s important for people to consider their individual financial circumstances.

"Generally, investment advisers charge a percentage of the assets they manage or a flat fee for their investment advice while brokers are paid commissions to execute trades to buy and sell securities," said Zipfel.

"While both professions are required to provide advice that is in the best interest of the client, an investment adviser is a fiduciary, imposing a duty of care and loyalty," said Zipfel. "That fiduciary duty includes an affirmative duty of utmost good faith, full and fair disclosure of all material facts, and an obligation not to subordinate their client’s interests to their own."

"Because we work for our clients for a fixed percentage fee based on the assets we manage, we are not incentivized to make trades to earn a commission," said Sigmon. "We are invested in the long-term success of our clients’ portfolios."

Collegiate Capital’s investment advisers help people manage a range of investment accounts, including both retirement and non-retirement accounts and trusts. They also provide estate and tax planning services.

Because people should begin planning for retirement and building savings as early as possible, Collegiate Capital serves people of all ages. Those approaching retirement age may need additional support as they plan for how they will live off of their investment nest egg once they’re no longer working full-time, said Sigmon.

"The past few years have been a roller coaster, but we’ve been here to help our clients stay on track with their investments," said Sigmon.