Financial Planners, Investment Advisers, Brokers? Who can help me?

Financial planner. Broker. Investment adviser. Do you know what each of these financial professionals does? Do you know how they are compensated for their services? Are they fee-based? Fee-only? Commission-based? Does it make a difference?

investment advisers or brokers or financial planners questionFinancial advising is a field populated by many different types of services and means of compensation, and understanding these differences can help you to choose the right type of financial professional to help you meet your financial life goals.

Sorting out the players

  • Investment Advisers

These are professionals who give advice on investments, including stocks, bonds, and mutual funds, and oversee these investments on your behalf. An investment adviser may have authority to make investment decisions on your behalf in order to meet your investment goals. Other terms this group of financial professionals may use to describe themselves include investment manager, asset manager, wealth manager, wealth advisor, and portfolio manager.

  • Brokers

A broker is an intermediary between the buyer and seller of a security, including stocks, bonds, or mutual funds. Brokers typically earn a commission on the products they sell and their recommendations must be considered suitable for your situation but are not necessarily in your best financial interest. Brokers also use the terms stockbroker, financial consultant, financial advisor, wealth manager, or investment consultant to describe themselves.  Clients who simply want help with a transaction, may find brokers to provide such assistance with a cost-effective, one-time commission (although some costs attach themselves to the financial product and continue for the entire time of client ownership).

  • Financial Planners

A financial planner should take into consideration all the elements of your financial picture – estate planning, planning for retirement, tax planning, insurance risk, and the management of debt – and work with you to make recommendations (and possibly assist with their implementation) to meet your financial life goals.  A financial planner may charge fees related to the clients entire financial picture, and such fees may exceed what a client could pay a broker for simple transaction assistance.

Key differences in compensation

  • Fee-Only

A fee-only adviser does not sell financial products and doesn’t act as a broker. They charge a flat hourly rate, or fee, for their advice and services. Fee-only advisers are typically Registered Investment Advisers (RIAs) and are registered with the Securities and Exchange Commission (SEC), or their respective states.  Although registration does  not imply any specific level of skill or training, RIAs have a fiduciary responsibility to clients. As a fiduciary, the RIA is legally required to always put the client’s interest first and occupies a position of special trust and confidence when working with a client.  Clients should be aware that when working with a fee-only adviser, the client is typically responsible for costs such as brokerage commissions and transaction fees in addition to the adviser’s fees.

  • Fee-Based

Fee-based financial professionals may charge fees or commissions based upon the products they sell, and typically they hold licenses that allow them to sell investments or insurance products for a commission. Compensation for fee-based advisors is usually a mix of fees and commissions. Sometimes these advisors are “dually registered” meaning they are Investment Advisor Representatives of a RIA and are also Registered Representatives of a brokerage firm.

  • Commission

A commission-based financial professional is essentially a sales representative, tasked with selling specific products (and achieving the best price obtainable in the current market) in order to receive compensation. They are registered representatives of brokerage firms, and are held to certain obligations in exchange for receiving the support of the firm. The commissions they receive for selling products offered by that firm are generally split, with a percentage of their commission going to the firm.  Sometimes these advisors are “dually registered” meaning they are Investment Advisor Representatives of a RIA and are also Registered Representatives of a brokerage firm.

When you entrust your money to someone with the intent of securing your future, you want to be sure that the person you choose is focused on the goals you set. Understanding the types of financial professionals available to you for these goals, as well as how each is compensated for their expertise, is critical in order for you to make an informed choice.

When considering hiring a financial professional to help you meet your present and future financial life goals, ask them one very important question: how are you compensated for your services? And then pay close attention to the answer.  If you are confused, you might wish to further request the compensation question to be answered in writing.

Still have unanswered questions?  Want to speak to a fiduciary adviser who is legally required to put your best interests first and one who will answer the compensation question in writing?

Start a conversation with us and we’ll get back to you within one business day to answer your questions and see if we can help you reach your financial goals.

Published: June 10, 2016

Author: Ann Pendley, CFP®

Phone: (812) 602-6304


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The information in this material is only as current as the date indicated, and may be superseded by subsequent market events or for other reasons. While all information prepared in this document is believed to be accurate, any statements of opinion constitute only current opinions of Payne Wealth Partners, Inc., which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. Accordingly, you should not put undue reliance on these statements. The information does not attempt to examine all the facts and circumstances that may be relevant to an individual’s financial needs. Payne Wealth Partners, Inc. is not soliciting any action based on these statements.

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