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Many of those who work on Wall Street go through a process in which they gradually learn that what is perceived as "smart investing" is often unbelievably dumb.
Specifically, they learn that many of the recommendations that Wall Street makes--and the transactions that Wall Street gets paid to facilitate--are not in their clients' best interests.
And once they learn that, they face a choice:
Continue to make the same bad recommendations and trades
Or change the way they do business, often in exchange for a lower initial salary.
One of those who changed is Josh Brown, a former stock broker who now writes a well-read financial blog called The Reformed Broker.
Once he realized that he was hurting clients by selling them stocks he didn't think they should buy, Brown abandoned being a "broker" and became a financial adviser at Fusion Analytics. In this new job, Brown says, his interests and his client interests are more closely aligned.
Most people don't recognize that there's even a difference between a "stock broker" and a "financial advisor," but there is. And for clients, it's a critically important difference.
Stock brokers. who generally work for brokerage firms, do not have to recommend trades that they think are in your best interests. Rather, they just have to recommend securities that are "suitable" for you (a much lower standard). Financial advisors, meanwhile, have a fiduciary duty to act in the best interests of their clients. Although even this standard is often violated (by financial advisors who don't understand the importance of low fees to investment returns, for example), it's a much higher standard. And, all else being equal, no one looking for sound financial advice should ever work with a stock broker over a financial advisor.
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