Question

What can a broker legally do that a registered investment adviser cannot?

A. earn money from clients by means of commissions and fees

B. recommend stocks that end up losing over half of their value

C. recommend trades that profit the broker or adviser at the expense of the client

D. charge an annual fee for consulting and managing an investment portfolio

Answer 1

A broker can legally earn money from clients through commissions and fees, while a registered investment adviser typically charges an annual fee for consulting and managing an investment portfolio. Both must act in the client's best interests.

Step-by-step explanation:

A broker can legally earn money from clients by means of commissions and fees(A), while a registered investment adviser typically charges an annual fee for consulting and managing an investment portfolio(D). However, both a broker and a registered investment adviser must act in their clients' best interests.

A broker or a registered investment adviser should not recommend trades or investments that profit them at the expense of the client(C). They should provide recommendations based on the client's best interest and risk tolerance. While they can recommend stocks that may result in a loss(B), they should have a reasonable basis for making such recommendations.