Registered Investment Advisers (RIAs) and Broker-Dealers (BDs) are held to very different standards of care and duties of loyalty in delivering services to clients.

An RIA, as a fiduciary, is subject to a principles-based standard that requires the RIA to act in its clients' best interests at all times.  Specifically, an RIA must put his clients' interest before his own, control expenses, avoid conflicts of interest, manage conflicts of interest in such a manner that the client understands the conflict and can give informed consent, disclose all fees and compensation in writing, and inform clients of available alternatives.

BDs are held to a lower "suitability standard" in their relationships with customers and most transactions fall under commercial contract law.  Absent a specific intent to defraud, it is a "buyer beware."  This puts brokers and their customers in opposing roles.

A recent Rand Corporation study commissioned by the SEC found that investors are generally unclear or unaware of the different obligations the various types of financial service providers have to their clients.  

Legislation under consideration in Congress seeks to harmonize the standards for investment advisers and broker-dealers who provide investment advice.  Representatives of the RIA industry have been vocal in their criticism of current proposals, claiming that it will weaken the "authentic" fiduciary standard in order to accommodate different business models.  Representatives of the BD industry have embraced the concept of a common "federal fiduciary" standard.

Read the Rand study