The Investment Scientist

In my last newsletter, I wrote about finding $50k+ worth of hidden costs due to conflicts of interest, and a reader asked me if there is a quick way to check if her financial advisor has such conflicts. Her question inspired my article today.

Before we dive into that, I must first give you a quick overview of the legal environment in which financial advisors operate. There is the Securities Exchange Act that regulates brokers and does NOT require them to act in the best interest of their clients, and there is the Investment Adviser Act that regulates RIAs (registered investment advisors) which does require them to act in the best interest of their clients. 

Your financial advisor can be a broker, an RIA, or even dually registered. Those dually-registered ones can be especially deceptive. Here is an actual example – the last few lines of a financial advisory firm’s website: