Investment Process

Choose Between Advisory and Brokerage Services

Because LPL Financial is a registered investment adviser (RIA) and a broker-dealer, our advisors and financial professionals can offer you both advisory and brokerage services. Understanding what each type of service entails will help you determine which approach will best help you pursue your investment goals.

Brokerage Accounts:

• Control: You have full control over the investments in your brokerage account. You make all the decisions about what to buy, sell, and hold.
• Fees: You typically pay transaction fees for each trade you make, such as buying or selling stocks, bonds, or other securities.
• Advice: While you can receive advice from a broker, you are not obligated to follow it. The broker's role is more transactional.
• Suitability: Brokers are required to recommend investments that are suitable for your financial situation, but they are not fiduciaries, meaning they are not legally obligated to act in your best interest.

Advisory Accounts:

• Control: In an advisory account, you delegate the management of your investments to a financial advisor. The advisor makes decisions on your behalf, based on your financial goals and risk tolerance.
• Fees: Advisory accounts often charge a percentage of the assets under management (AUM) as a fee. This fee structure aligns the advisor's interests with yours, as they are motivated to grow your portfolio.
• Advice: The advisor provides ongoing, comprehensive financial advice and manages your portfolio actively. They may also offer financial planning services.
• Fiduciary duty: Advisors who manage advisory accounts are fiduciaries, which means they are legally obligated to act in your best interest. They must put your interests ahead of their own.

The New Account Agreement

Before any investing takes place, you’ll sign a new account agreement with your LPL Financial advisor or professional. Don’t sign it unless you thoroughly understand and agree with the terms and conditions it imposes on you. Don’t rely on verbal representations from your financial advisor or professional that aren’t contained in the agreement.

To complete the agreement, you’ll need to make some critical decisions, such as:

Who will control the decision-making?

You can control the investment decisions made in your account or give discretionary authority to the financial advisor or professional to make them for you.

Discretionary authority allows a third party — the financial advisor or professional — to make investment decisions based on what they believe is best for you. The financial advisor or professional doesn’t have to consult you regarding the price, type of security, amount, or when to buy or sell. Don’t give discretionary authority to a financial advisor or professional or anyone else without considering whether this arrangement is appropriate for you.

How much risk should you assume?

You’ll also need to specify your overall investment objective in terms of risk. Risk is the possibility of losing some, or all, of the money you invest. Be sure that the risk level you choose accurately reflects your investment goals.

If you have a high risk tolerance, you may be more willing to risk losing money to get potentially better results. If you have a low risk tolerance, you’ll probably lean toward investments that maintain your original investment.

A financial advisor or professional will also talk to you about other forms you may need to complete.