How to evaluate investment advice from your brokerage firm - a checklist for physicians nearing retirement

Introduction

As a physician nearing retirement, your financial decisions are more complex—and more consequential—than ever.

You’ve worked hard, earned well, and built a life worth protecting. But many physicians unknowingly take investment advice from firms that don’t always act fully in their best interest.

The biggest reason? Conflicted incentives embedded in the dual registration brokerage model.

This guide will help you quickly evaluate whether the advice you’re receiving—or considering—is truly designed for your goals… or someone else’s bottom line.

Quick Definitions Before We Start

• Broker-Dealer (BD): A firm that facilitates trades and can earn commissions or product-based compensation.

• Registered Investment Advisor (RIA): A fiduciary firm legally required to put your best interests first. Usually compensated via advice fees—not product sales.

• Dually Registered Firm: Almost all brokerage firms today are both BDs and RIAs, leading to overlapping—and sometimes conflicting—roles at the firm level.

  
  

  Why This Matters

  In medicine, financial conflicts are tightly regulated. Physicians can’t refer patients to facilities they profit from—unless strict conditions are met.

  
  

  In financial services, those safeguards don’t necessarily exist.

  
  

  Most brokerage firms today are dually registered—offering fiduciary advice on one hand, while collecting payments from the same fund or asset management companies on the other. Even if your advisor isn’t personally receiving commissions, their firm may still be earning revenue from the same investment companies they recommend.

Here’s why this risk is growing: Commissions have largely disappeared, forcing firms to replace lost income through more opaque revenue-sharing arrangements or by aggressively pushing advice on clients, even if that advice is fundamentally subject to conflicts of interest at the firm level, in our view.

Brokerage firm consolidation means fewer competitors—and less pressure to reduce conflicts or increase transparency.

So while your advisor may have your best interests at heart, the firm-level incentives behind the scenes may not always align with your goals. That doesn’t make the advice wrong—but it does mean clients deserve to ask the right questions.

To put it simply: If financial self-referral like this were common in medicine, it would likely be illegal. In finance, it’s legal, common and with the move of brokerage firms heavily into the investment advisory space to replace lost revenue from going commission free - increasingly widespread.

I want to be extremely clear - this doesn't mean brokerage firms are bad actors, far from it, it just means that you benefit from being extra vigilant about the advice you receive from them because while there are firewalls within divisions to prevent conflicts of interest, dually registered firms are most certainly receiving kickbacks and revenue shares from the exact same mutual fund and asset management companies that they recommend on the investment advisory side.

In medicine this kind of relationship might be illegal, but in finance it is legal but you should be aware of the firm wide conflicts that this approach brings.

Traditionally brokerage firms were mostly product places and didn't give or rarely gave investment advice and mainly made their money off commissions - but with the mix of investment advice and product sales coming out of brokerage firms today the conflicts are far bigger today than I've seen at any point in my career.

Unfortunately from a practical point of view, I don't think these conflicts of interest can actually be mitigated. To mitigate them fully, a brokerage firm "advisor" would need to custody the assets at a firm other than their own, not use any of the same asset management companies or fund companies that pay their own firm revenue shares of kickbacks and be willing to recommend new custodians if the firm they were custodying assets at wasn't offering competitive products to their clients. But if they did that, they would really be just acting as an investment advisor and there would not necessarily be a need to be dually registered because their firms wouldn't be earning anything off the products.

The 7-Point Checklist

Use this checklist to assess the true objectivity of your current or prospective advisor.

1. Is your Firm Dually Registered as a broker dealer and an investment advisor?

If yes, the firm may may:

• Earn commissions on some products

• Receive kickbacks (revenue sharing) on the brokerage side from the same companies that they recommend on the investment advisory side (a potential serious conflict of interest that could only really be mitigated fully by not accepting revenue shares on the brokerage side from companies that are the same or related to fund companies or asset managers they recommend on the investment advisory side.

  
  
  
  

What to ask:

“Is your firm always acting as a fiduciary for all of its customers at the firm level (not just advisory division level)?

When Advice and Business Share a Roof: Why Structural Conflicts Matter

First, a note of respect: brokerage firms provide essential services—technology, compliance, market access, and support—that make investing accessible and efficient. These firms are a vital part of the financial ecosystem, and their role should not be underestimated or dismissed.

That said, it’s important for clients to understand how the structure of these firms can create firmwide conflicts of interest — especially when a firm acts both as a broker-dealer and as an investment advisor.

Even though brokerage firms are not the enemy, and revenue sharing is a conventional, accepted way to fund the business, these arrangements could subtly influence which products are recommend on the investment advisory side.

Virtually all brokerage firms today are dually registered — acting as both broker-dealer and fiduciary advisor. The brokerage division earns revenue from asset managers, while the advisory division owes clients a fiduciary duty.

When the same product companies pay revenue sharing to the brokerage side and appear in advisory portfolios, it raises a firm-level conflict that can be difficult to impossible to fully overcome in our view.

Could firms fully separate these roles? In theory, yes. But in practice, it’s challenging, especially when firms aim to replace lost commissions with advisory fees while continuing to accept revenue sharing on the brokerage side.

To really disentangle this conflcit of interest a brokerage firm advisor would have to custody the asset at a different brokerage firm and wouldn't really be able to recommend fund companies that his or her own brokerage firm takes revenue shares from. By separating payment for distribution at the firm level, from recommendations on the investment advisory (by not recommending products from companies that pay revenue shares) they would be able to disentangle this conflict of interest.

Of course a much simpler way is to just not take compensation for product sales, or distribution to clients and simply get paid very clearly and in a straightforward way for advice only, at the firm level. That is what you get when you work with a singularly registered investment advisory firm as opposed to a dual registered broker dealer/investment advisory firm - which is what all the major brokerage firms are today.

So, in summary, even honest advisors at dually registered firms, like most brokerage firms today may operate within a firm structure that may never be truly independent at the firm level, in our view, and that is concerning.

By contrast, singularly registered RIAs, paid solely by their clients and accepting no product-based compensation, offer a cleaner, more straightforward alignment of interests.

When Disclosure Isn’t Enough

The financial industry often relies on disclosure to manage conflicts — but for physicians trained to expect prohibited conflicts, disclosure may feel insufficient.

When a firm receives payments from the companies it recommends, it’s reasonable to ask if the advice is fully objective or whether this advice could be subtly influenced by the firm's economics.

You may not blindly accept a physician’s treatment recommendation if their clinic financially benefitted from the drug company whose products they were recommending — why would you accept it from your brokerage firm?

This is a hill that I'm happy to stand on. In our core belief, there should be no revenue sharing or kickbacks in the advice you receive - at the firm level (not just the division level). Because you and your retirement deserve advice that is as free as possible from structural conflicts of interest at the firm level.

The Bottom Line

Revenue sharing isn’t bad. Brokerage firms aren’t bad — far from it. They provide valuable services and infrastructure. As pure brokers they are amazing, in our view!

But understanding the incentives embedded in a dual-registered firm helps clients make more informed decisions about where they want to get their advice.

2. Does the Firm Recommend Its Own Products or Those from Revenue-Sharing Partners?

Many firms promote proprietary funds or products that pay them extra fees—on top of the advice fee you’re already paying.

Remember: Even if the advisory side is independent, the brokerage side may be receiving kickbacks from the same product providers, which raises questions about the true independence of the firm's recommendations to their advisory clients. To see this you have to look beyond the division and to the firm level and ask yourself whether its sits right with you that your investment advisor may be recommending products that the firm has other financial relationships with and whether the advice given can ever be truly seen as independent and objective as a result of this potentially strong structural conlfict of interest.

What to ask: “Does your firm receive more compensation if I invest in your firm's proprietary investments? Does your firm have financial relationships with asset managers or mutual fund companies that your firm also recommends to its investment advisory clients.

Remember every question should be targeted at the firm level not the advisory division level - because the advisory division will take some efforts to be independent but at the firm level there is a true of question or whether independence can ever be possible if part of the firm is taking kickbacks from providers who they are also recommending on the investment advisory side of the firm.

3. Are the Advisors Truly Independent?

At large, publicly traded brokerage firms, advisors may be incentivized to:

• Avoid recommending external custodians, even if they would be better for you the customer and offer bigger sign on bonuses and things like that.

• Keep assets in-house, even if better options exist elsewhere

  
  

What to ask:

“If another firm offered better rates, tools, or investment options, would you recommend I move—knowing it would mean I’d stop paying you?”

This may seem like an unimportant question, but as a firm that works with all the major brokers I can tell that there are major differences between them once you get outside of the stocks and etfs listed on the NYSE and Nasdaq which they all do the same. Clients can materially benefit from being at one brokerage firm versus another depending on their needs and occasionally clients can be very financially rewarded for changing brokerage firms.

4. How Does Your Firm (not just your division) Make Money?

Transparency here is everything.

RIAs typically earn fees as a firm for advice only. Dually registered (Broker Dealer + investment advisor firms which is what almost all brokers are today) firms often earn:

• Trading commissions

• Product sales incentives

• Kickbacks from mutual fund companies (called revenue shares)

• Platform or placement fees

• ....And Investment Advisory Fees - which means at the firm level they may be very conflicted due to their complex business relationships with product providers

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⚠️ What to ask:

“Can you walk me through all the ways how your firm gets paid—across all levels - not just in the advisory division? How can I be assured that your firm's business dealings in one area would fundamentally compromise your advice in another area?

5. Are There Capacity Constraints or Scale Conflicts?

Big firms manage trillions. That means:

• Less scalabale investments that are higher quality may never be recommened to you since scaling the advice may be the primary concern, and capacity constraints can make this a problem.

• “Model portfolios” may be selected primarily with scalability in mind, as opposed to whether they are the best option available to you (in fairness, this can happen anywhere but the bigger the firm the more they need each recommendation to scale and when you are dealing with hundreds of billions or trillions in client assets recommending investments that can absorb any amount of inflows may be a primary concern)

• You may be steered toward products that can handle large flows—even if they’re not optimized to your needs

  
  

What to ask:

“Do your firm's investment recommendations for all clients (not just in the advisory division) reflect the scaling problems of a firm that has with trillions of client assets, or the position of me as an individual client who often has just millions of assets.

6. Am I Free to Choose or Change My Custodian (i.e. the brokerage firm that holds my assets) and still continue working with you? Or if I want to switch brokers to get access to better products or to get a sign on or transfer bonus would that end our relationship?

Many Registered Investment Advisory Firms can work with a variety if not all custodians or brokerage firms. However, many Brokerage Firm investment advisors can't handle your account if you move to a different custodian/broker.

⚠️ What to ask:

“To work with you as my investment advisor, will I be required to use your brokerage firm as custodian? If so, why?" “Does your firm have financial incentives to keep me here even if another firm is willing to pay me thousands of dollars or tens of thousands of dollars to custody my assets with them instead of you?”

7. Is the Advice I'll be Getting Here Truly Optimized for my needs—or Just Scaled for the firm's needs to allocate recommendations amongst tens or hundreds of billions dollars of client assets?

A physician approaching retirement deserves nuanced, tax-aware, long-range planning—not cookie-cutter allocations.

What to ask:

“Do your recommendations reflect my individual needs and situation, or do you mainly just recommend investments that meet the firms needs (i.e. investments that can be scaled up with tens or hundreds of billions invested in them) even if those investments may earn lower returns for me over time - due to the diseconomy of scale in investments”

What This Means for You

If your dually registered brokerage firm

• Earns compensation from third-party fund companies revenue shares or kickbacks

• Wears a broker hat for some clients and an investment advisory hat with others, even though they are all in one firm

• The Firm recommends proprietary products that they earn a fee on or discourages transfers of assets out of their brokerage firm even if you would clearly financially benefit from the transfer (i.e. a competing brokerage firm is willing to pay you $20k to move your assets there and keep them there for a number of year)

• Can’t explain how they get paid in 60 seconds or less…

...you may not be getting advice that’s 100% aligned with your best interests.

About the Author

Daniel is a fiduciary advisor focused on physicians and other clients nearing retirement. A graduate of Stanford University and UC Berkeley School of Law, he has over 15 years of experience advising doctors on wealth transitions, risk reduction, and estate preservation. He’s overseen more than $1 billion in securities transactions and believes great financial advice starts with one principle:

“Your advisory firm should work for you—not for the products they sell.”

Final Note

Brokerage firms are not bad actors - they are actually fantastic at being brokers. But when you mix advice with brokerage sometimes the firmwide conflicts have to be considered. They’ve made markets more accessible and efficient than ever before. In their broker role as custodians, they have been and continue to be fantastic.

However, in today's financial landscape brokerage firms needs to generate more revenue to offset the loss of commissions due to changes in the industry.

If you choose to take advice from a brokerage firm, that is certainly a personal decision. However, we believe that it is important to understand that when working with singulary registered investment advisory firms you may have greater access to advice that is less conflicted, less compromised—and focused solely on you. If you chose to take investment advice from a dually registered firm or brokerage firm advisor, it is important to be knowledgeable about the conflicts of interest at the firm level for those providers, not just the conflicts of interest at the division level.

I would not personally ever take financial advice from a brokerage firm that makes money off selling products including making money off some of the vendors they may be recommending for investment advisory clients, but everyone has to make their own decisions and do what feels right to them.

In closing brokers are great at being brokers. As commissions have gone away, they are likely to increasingly pester you about singing up and paying for investment advice. While taking and apying for that advice is a personal decision, it is important to understand that even if a division is walled off to try to be more independent, in the real world if it is very difficult to maintain independence when operating in both these realms (facilitiating product sales and then advising on the sales of those product when the vendors are often the same companies on the brokerage side and the investment advisory side)

As physicians familiar with the Stark Act and the Anti-Kickback Statutes I'm sure on some level you see the structural issues with recommending products from the same companies that pay you for distribution and as long as you are aware of this issues you are in a better position to make an informed decision about where you want to get your advice.