Registered investment advisers and broker-dealers both sit between people and their investments, which is why the public confuses them. The regulatory reality is that they are different animals, registered under different laws, overseen by different regulators, and historically held to different standards of care.
A registered investment adviser is in the business of giving investment advice for compensation and is regulated under the Investment Advisers Act. An RIA owes clients a fiduciary duty, the obligation to act in the client's best interest. A broker-dealer, regulated under the Securities Exchange Act and overseen by FINRA, is in the business of effecting securities transactions. The old model paid brokers by transaction; the adviser model charges for advice.
For years the standards diverged: advisers owed a fiduciary duty, while brokers owed a suitability standard. Regulation Best Interest, adopted in 2019, raised the broker standard and requires brokers to act in a retail customer's best interest when recommending securities, narrowing but not erasing the gap. Many firms are dually registered, operating as both, which makes the hat they are wearing at any moment the thing to understand.
The registration a firm holds determines its duties, its regulator, its disclosures, and how it is paid, so it shapes the advice a client receives. Knowing which you are dealing with, and which you should register as, is a foundational decision for a new firm.
Advice, or transactions. The registration follows the answer.
Greenridge L&C Advisors is a compliance consultancy, not a law firm. This is general information, not legal advice.