Most people don’t realise that there are many different types of financial advisors and that not all of them are looking out for the client. It can start to get extremely complicated, but we’ve got you covered. In this article, we have narrowed down the broad range of financial advising into four prominent roles.
1. Insurance agents
Almost all of us at some point been approached by insurance agents or brokers to sign up for a new financial product. These agents are basically like your telemarketers or product salesman; their primary agenda is to push products on a monthly basis. So if you sign up for a big financial product that they claim to have all the benefits that you’re looking for, think again. Their only objective is to sell a target number of products, and their primary responsibility lies with the financial institution that they’re affiliated with and not the client.
2. Fee-Based Advisors
Fee-based advisors are on the fence when it comes to financial advice because the only people they serve are themselves. So say if you go to a financial advisor for immediate help on your finances then he or she is open to helping and push certain financial products that they are licensed to sell by financial institutions. Here is where things get tricky because you’re unsure whether you got great financial advice for the money you paid or whether it was all just a ploy to push a certain financial product on you. But if you insist on getting advice only when you require it, this is a solution that has its pros and cons.
3. Fee-only Advisors
Fee-only financial planning is where you can know for certain that the advice you’re getting is given with you being the sole beneficiary. Large banks and institutions do not have fee-only advisors, and these types of advisors can be seen in independent financial institutions. These financial advisors work on either an hourly basis or like your legal advisor, who in most cases would be on a retainer. The key here is to find the right advisor with the right client profile and level of experience. Also, remember that the financial product that you’re signing is going to be in your best interest because fee-only financial planners don’t push financial products as a part of their job unless it benefits you.
Registered Investment advisors are affiliated with large financial institutes, and their sole purpose is to work for the client. They handle complex cases where the client either has a lot of assets or if their net worth is beyond a certain point. Besides that, the RIAs are quite similar to fee-only advisors.