By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@paladinregistry.com
Site: http://paladinregistry.com
About: Jack writes for the InvestorWatchdog website and Worth magazine. He worked in the financial services industry from 1976 to 2004. For twenty of those years he was the president of a Registered Investment Advisory firm and a Broker/Dealer. Jack is the author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor and is a co-founder of PaladinRegistry.com.See Authors Posts (87) | July 3, 2009 | Who Can I Trust?

Investors have been confused for decades about the roles of investment sales representatives and financial advisors.  That is because both types of professionals sound a lot alike when they market investment products and services.

Consider this:  Financial advisors provide investment advice and services for fees.  Sales representatives recommend investment products that pay them commissions.  How many investors know the critical differences between "financial advice" and "investment recommendations?"  None, because from the investor point of view there aren’t any.  This is especially true when the person providing the advice or recommendations is a skilled sales person.

Sales representatives have always been held to lower ethical standards — after all, they are sales reps.  Reps must make "suitable" investment recommendations.  Could the industry have selected a more vague term to describe an ethical requirement?

Financial advisors have always been held to higher ethical (fiduciary) standards –for example, investor interests must come first.  If investors knew this difference they would only buy financial services from advisors.  Hence, the need for sales representatives to obscure the critical differences between reps and advisors when they "recommend" products to investors.

The solution for this problem is investor education and full disclosure from advisors and representatives.  However, Wall Street will fight tooth and nail to avoid them, in particular disclosure, because it would reduce the productivity of sales reps.