What Is the Difference Between a Fiduciary and a Stockbroker?

Fiduciary, stockbroker, financial planner, investment advisor. They’re all the same, right? Not exactly. While both fiduciaries and stockbrokers offer financial planning and investment services, a few key differences may cause you to choose one over the other.


Stockbrokers are paid on commission, while fiduciaries are paid as clients’ assets grow.


A broker’s income is largely dependent upon the commission he or she earns from selling financial products. Each investment opportunity has a different commission value. As a result, it can be tempting for brokers to build portfolios with investments that will make them the most money, rather than focusing on what is best for the client.

On the contrary, fiduciaries are paid a percentage of their clients’ total assets under management. This means that fiduciaries’ income only grows as their clients’ investments grow. Put simply, fiduciaires don’t make more money unless their clients do. As a result, fiduciaries have even more motivation to build portfolios that work for their clients, which should give clients peace of mind.


Stockbrokers are only allowed to utilize a handful of investment opportunities, while independent fiduciaries have access to an unlimited number of possibilities.


Stockbrokers at large, chain investment advisement firms have a list of investments they can use to build portfolios. Because brokers are not allowed to stray from this list, clients may miss out on their best-suited investment opportunities.

Independent fiduciaries, on the other hand, have access to an unlimited number of investment opportunities, and through careful research and analysis, fiduciaries can find investments that best meet clients’ needs. This allows fiduciaries to build stronger portfolios that reflect clients’ financial goals.


Stockbrokers must meet monthly quotas, while this is not a requirement for fiduciaries.


In addition to being required to stick to a list of investments, most stockbrokers are also required to meet a quota, whether that be a set monetary value or number of financial products. This can cause brokers to act selfishly and push products that aren’t necessarily best suited for their clients.

Fiduciaries are not required to meet monthly quotas. This takes unnecessary stress off of fiduciaries and allows them to focus on helping their clients, rather than worrying about how they are going to please their supervisor.


Stockbrokers abide by the “suitability standard,” while fiduciaries are required by law to put clients’ best interests first.


This is the biggest and most concerning difference between a fiduciary and a stockbroker. Stockbrokers as subject to the “suitability standard,” which means that they are required to give clients “suitable” financial advice. However, stockbrokers are not required to give clients the best advice. This allows stockbrokers to put their firm in front of their clients’ best interests, and as a result, clients’ finances may suffer.

In the meantime, fiduciaries are subject to the Investment Advisors Act of 1940, which legally requires registered investment advisors to offer financial advice that puts the clients’ needs before the firm’s. In other words, fiduciaries must do what is best for the client. We believe this is reason enough to choose a fiduciary over a stockbroker.

Lorenz Financial President Mark Lorenz chose to become a fiduciary, rather than a stockbroker, for these reasons. We believe that fiduciaries are better able to meet investors’ financial goals and are proud to serve as investment advisors in the Lafayette, Indiana area.



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Lorenz Financial Services, LLC is a Lafayette, Indiana fiduciary who offers financial planning and portfolio management services. If you have questions about who we are or our services, please contact us at (765) 532-3295 or email us.