Adviser or advisor, does it really matter how it’s spelled? The two are interchangeable, and either spelling denotes in a client’s mind that they are owed a fiduciary duty, some advisors argue. Yet, wirehouses may be craftily using one spelling so that their advisors can circumvent fiduciary obligation.
The Investment Advisers Act of 1940 uses adviser with an “er,” yet the handful of advisors that I polled said that using an “or” is just fine too. Ron Rhoades, director of research for Joseph Capital Management, says that today, the word is typically spelled with “or.” His firm, he says, calls itself “a registered investment advisory firm, simply so that my clients don’t think that I’m making a typo.” If he were to spell advisor with “er,” “clients and prospective clients are probably thinking that I can’t spell.”
Scott Bell, CEO of Gross Domestic Product Inc., which specializes in personal finance and investing, agrees that typically, RIAs use “advisor,” despite the fact that the Advisers Act uses “er”. The two spellings, he says. “have gotten casually intermixed.” Says Bell: “The truth of the matter is, either [spelling] is proper, but if you wanted to pin it down to the legal definition, it’s with an ‘er,’ that’s why you’ll never see a business card from a wirehouse broker ever say financial advisor with an ‘er’ unless it’s on the private wealth side, and then they are calling themselves investment advisors because they are operating in a more closed fiduciary responsibility” relationship.
Yet another advisor who emailed me said that when she created her firm in 2008 she decided to use “adviser” because that’s AP style—both she and her partner are former journalists--because that’s the way the Securities and Exchange Commission spells adviser under the Adviser Act. But, she maintains, “as far as I am concerned, there is no legal distinction between the two spellings.”
But is there a difference in clients’ perception of the different spellings? As to fiduciary duty, because fiduciary duty is principles-based there is an “overall principle that if you hold yourself out to be an advisor, chances are the court or an arbitrator will find that you have a fiduciary duty,” says Rhoades. “It doesn’t matter if you spell [advisor] with ‘er’ or ‘or’.”
When advisors get sued, Rhoades says, its under the “common law fiduciary standard,” so “regardless of what the Investment Advisers Act says, whether someone is a registered investment advisor (RIA) or not, someone can be held to the common law fiduciary conduct, which is how advisors get sued in state court or in an arbitration—it’s under this common law fiduciary standard because the Investment Advisers Act does not create a cause of action itself.” When plaintiffs’ lawyers sue, he continues, “they sue under the state common law fiduciary claim, and the initial question is: Are you a fiduciary?’”
Having said that, though, Bell maintains that the big wirehouse firms’ “legal teams have played it out to see how they can push the definition of financial advisor.”
Of course, as Patrick Burns of the Los Angeles law firm that bears his name adds, any efforts to circumvent a fiduciary duty by using one spelling versus the other could be a "moot point" if the SEC writes a rule putting brokers under the same fiduciary standard as advisors.