A broker-dealer is a firm registered to buy and sell securities, either for customers or for its own account. Its representatives are regulated under a different framework from investment advisers.
The traditional broker-dealer model centres on executing securities transactions, historically compensated by commission. The investment adviser model centres on ongoing advice, typically compensated by a fee on assets.
Broker-dealer representatives are subject to Regulation Best Interest, which applies at the point a recommendation is made. Investment advisers owe a fiduciary duty across the whole relationship.
The standards have converged but they are not identical, and the difference in when they apply is the substantive one.
Many firms and individuals are registered both ways, which means the applicable standard depends on the capacity they are acting in for a given piece of business. Form CRS exists partly to make that legible to clients.
A middle model: representatives operate their own practices and affiliate with a broker-dealer for supervision and platform access. More autonomy than a wirehouse, less than an independent RIA.
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