Texas State Securities Board

Choosing a Financial Professional

Texas State Securities BoardAt some point you may turn to a financial professional for help, particularly if you’re trying to achieve different goals – such as planning for retirement, financing children’s education, and buying a home. Before you begin the search for a financial professional, you need to identify the type of help you need. Essentially there are two types of financial professionals you might consider working with—brokers and investment advisers.

Brokers and investment advisers provide different services, have different responsibilities to their clients, and differ in the way they charge for the work they do.

What they have in common, though, is that they are both certified, meaning they have passed required examinations and have received licenses to offer their services to investors. Equally important, they are both subject to rules and regulatory agencies, such as FINRA, the SEC, and the Texas State Securities Board.

Before working with a financial professional, you should always be sure to check their credentials.

One of the primary responsibilities of the State Securities Board is to ensure that people selling financial products and offering financial services are licensed to do so. The Agency also ensures that practitioner adhere to all of the rules and can take administrative and legal action against those who ignore or violate those rules.

If you have questions about a specific professional, or want to file a complaint about a professional whom you suspect of fraud, you should contact the Agency by phone, email, or written letter.


Investment advisers (IAs) help you make investment decisions and manage your portfolio. They have a fiduciary duty, or legal requirement, to act in your best interest and not for their own personal gain. An investment adviser may work as a sole practitioner or at an advisory firm that employs a number of advisers.

Unlike brokers, who earn a commission on trades they make on your behalf, investment advisers charge a fee for their services, sometimes based on a percentage of the money they manage, sometimes on an hourly basis, and sometimes on a retainer basis for a package of services.

Form ADV: Researching an Adviser

In selecting an adviser, be sure to do your homework: Advisers are required to disclose key information on Form ADV. Part 2 of the form will tell you:

  • The IA’s business practices
  • Fees and compensation
  • Multiple costs folded into a “wrap fee”
  • Potential conflicts of interest in working with you
  • Firm’s social media accounts
  • Types of clients the IA works with
  • Disciplinary information, if any
  • How the IA reviews client accounts
  • Financial information about the IA’s firm

You should also ask about a prospective adviser’s work with other clients whose financial situation may be similar to your own. You can read Parts 1 and 2 of the ADV on the Investment Adviser Public Disclosure (IAPD) website. The IAPD system provides information entered by the advisory firm as well as information about the firm’s representatives who are authorized to offer investment advisory services to Texas residents.


Brokers and broker-dealers buy and sell securities, such as stocks and bonds, on behalf of customers.

Brokerage firms employ salespeople, or stockbrokers, who are officially referred to as registered representatives. These individuals may use unofficial titles, too, including financial consultant, financial adviser, and investment consultant. In part, these titles represent the broader range of investment planning services that brokerages now offer in addition to trading securities.

Many brokers’ compensation is based on the commissions clients pay each time they buy or sell a security. However, some brokers’ compensation is based on a percentage of the size of the accounts they serve. You should understand how a broker is compensated before you start working with one.

Broker Responsibilities

Unlike investment advisers, brokers are under no legal obligation to act as fiduciaries. They are only required to recommend assets that are suitable for you, based on your financial situation and other securities you hold. Brokers also have no legal responsibility to inform you of conflicts of interest. Other parties – specifically, the companies offering the securities or the firms that brokers work for – may compensate brokers for selling you certain investments.

Brokers may be required to be registered with more than one regulatory authority, depending on where they live, to whom they offer securities,  and the type of business they operate. Brokers who offer and sell securities in Texas, for example, must be registered with the Texas State Securities Board.

Researching a Broker

To research a broker, brokerage firm, or securities dealer, you may start with the Financial Industry Regulatory Authority’s BrokerCheck, which provides key information about a broker, including:

  • Employment history for past 10 years
  • Disciplinary actions
  • Professional designations
  • Civil judgments, arbitrations, and disputes
  • Criminal convictions or indictments
  • Outstanding liens and judgments


Investors who are comfortable handling financial matters online have another option for help: a so-called robo-adviser that provides automated but still personalized investment guidance.

You can start the process of enlisting a robo-adviser by filling out an online questionnaire on the website of one of the many firms offering this service. You’ll be asked to detail your financial goals, income, assets, risk tolerance, short- and long-term goals, and investing time horizon. The robo-adviser crunches the data you’ve provided and churns out what it determines to be the most appropriate mix of assets for your portfolio. Robo-Adviser Features

Robo-advisers can handle single accounts, such as an Individual Retirement Account, as well as multiple portfolios of taxable accounts, college savings accounts, or other categories of investment accounts.

Fees for robo-advisers typically are less than those charged by traditional advisers because the service is largely automated. In addition, roboadvisers use low-cost index funds and exchange traded funds to build portfolios.

One thing you should make sure you’re clear on is how often your robo-adviser rebalances assets in your account. Rebalancing, which involves selling some assets and buying others, ensures that the overall mix of investments in your portfolio doesn’t significantly differ from your target allocation.

Besides being an essential element of an investment strategy, rebalancing can also can affect your taxes. For example, if the robo-adviser updates your portfolio frequently, you could have several short-term gains that are taxed at your regular tax rate rather than at the lower rate that applies to long-term capital gains.

Finally, be sure to consider a robo-adviser’s approach to investing before signing up. Just like their human counterparts, robo-advisers have varying investing styles and offer different investment products. The final decision on how you should allocate assets in your portfolio is up to you.


The following guidelines will help you invest wisely, avoid misunderstandings, and potentially avoid inappropriate investments or outright scams:

  • Receive complete information about the risks, obligations, and costs of any investment before you invest.
  • Don’t be rushed into an investment. Make a quick decision today and you may regret it for a lifetime.
  • Contact the Texas State Securities Board to obtain all regulatory information about firms and individuals handling your accounts.
  • Receive copies of all completed account forms and agreements.
  • Make sure you understand your account statements and check for accuracy.
  • Confirm that you can access your funds in a timely manner and receive information about any restrictions or limitations on access.
  • Know precisely how much an investment is costing you in fees, commissions, and other charges.

Be sure to clear up any questions ahead of time, and if necessary, consult with a trusted third party, such as your lawyer or accountant.