What Type of Financial Advisor is Right For You?
A financial advisor or financial adviser is a person that offers financial advisory services to customers according to their financial status. In most countries, financial advisers must undertake specific training and obtain registered with an agency, sometimes in their country of residence, before offering advice. The various types of financial advisers are investment advisors, investment consultants, estate agents, mortgage brokers, insurance advisors, credit strategists, estate planners and cash managers.
There are various types of financial advisors including self-employed advisors, company officers, members of firms and registered investment management advisors. A registered investment management advisor is required by law in the US to register with the SEC and meet strict guidelines for regulated investment management activities. This type of financial advisor provides investment advice, as well as provides tax planning and asset protection services. Other types of financial advisors include estate agents, tax planners and mortgage brokers.
Fee-based financial advisors, also called discount brokers, do not work for a fee and are independent contractors. They usually work alone or for a small firm and may work as part of a larger group or as an independent contractor. These fee-based financial advisors offer advice services in the areas of personal finance, insurance, real estate and investments. The typical fee schedule for an hour of financial advice can range from a few dollars for simple advice to several hundred dollars for a more comprehensive financial plan. Some fee-based financial advisors work exclusively for firms while others work at independent agencies and act as independent contractors for other companies.
Self-regulating financial advisors are regulated by state law and are independent from any company they represent. These advisors are primarily focused on setting their own personal goals and objectives, which include investment goals and risks, rather than trying to achieve a set objective through a team of other employees. A self-regulating advisor may not take into consideration the long-term goals of a client and may not initiate a particular course of action that conflicts with the interests of a client. Self-regulating advisors should inform their clients about any potential conflicts of interest that may be involved with their financial advice.
Other factors that can influence the type of financial advisors who are right for a particular situation include the level of risk tolerance, experience and education. Different financial advisors help people with various investment goals, including retirement, investing for kids and earning a living. All good financial advisors help their customers set goals and develop appropriate risk-tolerance levels. The key is to make sure all your financial goals and risk tolerance levels are met.
The final category of financial advisor includes those who work in “the business”. Business-based advisors provide investment advice only. They are typically employed by a company to advise the company on certain investment opportunities. The advantage of business-based advisors is that they have an inside track at the best times to buy and sell certain securities. In addition, they are often paid commissions on the trades they recommend, which can boost their income. However, these advisors do not usually offer an array of financial products.