In the last several years, many stockbrokers have begun transitioning their business model from an overt sales-transactional process to a model that is more consultative.  Brokers are increasingly relying on third-party money managers for actual investment management, positioning themselves as investment advisors to their clients.  The difference is more than just one of semantics.

Brokers are, by definition, in a transactional business.  Brokers bring buyers and sellers together to effect transactions.  Brokers are regulated by the National Association of Securities Dealers (NASD) and as such, are exempted from having any fiduciary responsibility to their customers.

As the brokerage industry moves toward the advisory industry and blurs the distinction between transactional and management roles, questions of regulation arise.  The Securities and Exchange Commission regulates Registered Investment Advisors, not the NASD.  The SEC disclosure requirements about past client complaints, lawsuits and settlements are significantly different than those the NASD requires of brokers.  Here are a few questions to ask any investment professional you are considering hiring.