The 3 Types of Financial Advisors (Part 2‪)‬ Retire With Ryan

What are the three different types of financial advisors? Why do I believe a fee-only financial advisor is the best? If you’re considering hiring a financial advisor for the first time—or questioning if your current advisor has your best interests at heart—don’t miss this one.
It’s part 2 of my series in which I’m covering some of the topics in my upcoming book, “Fiduciary: How to Find, Hire, and Establish a Trusted Partnership with a Fee-Only Advisor.” The goal is to help my listeners find a financial advisor that they can trust
You will want to hear this episode if you are interested in... [2:09] Type #1: A stockbroker or insurance broker [4:43] Type #2: Registered investment advisor [7:32] Type #3: A fee-only investment advisor  [9:11] The three types of fee-only financial advisors  [11:43] The three ways fee-only financial advisors are compensated [15:58] What’s being covered in episode #3 in this series Type #1: A Stockbroker or Insurance Broker The first type of advisor is a broker (stockbroker or insurance broker). They’re compensated via commissions (the old-school way of doing business) and paid per transaction. The more transactions they make, the more turnover, and the more commissions they make. 
Brokers are incentivized to change client’s portfolios—even if it’s not in their client’s best interest. They’re also obligated to do what’s best for their brokerage firm (to make them more money). 
That’s why most financial advisors have moved away from the broker model. If you need to buy insurance, a stock, or a bond and you know this person isn’t a financial advisor, it’s fine to work with them—just don’t expect objective advice. 
Type #2: Registered Investment Advisor and Broker A Registered Investment Advisor is someone who’s registered with the state they do business in or the SEC as an investment adviser representative of a firm. They work with clients on a fee basis. However, these financial advisors are also licensed as a stockbroker/insurance broker. Because brokers don’t have to disclose these conflicts of interest (currently), you don’t know if they’re acting as a broker or fee-only financial advisor. 
Type #3: A Fee-Only Investment Advisor  A fee-only investment advisor is only compensated by the fees their clients pay them. They do not have a broker or insurance license. This is the best option for working with a financial advisor. 
You know when you ask them a question, there will be no conflicts and they will be acting in your best interest. How do I know? Because a registered investment advisor has a legal obligation to put a client’s interest ahead of their own and must disclose any conflicts of interest. 
There are typically three types of fee-only financial advisors:
Fee-only financial advisors that only do financial planning (retirement planning, business planning, estate planning, etc.). You take their advice and implement their recommendations on your own. They don’t manage any client portfolios.  Fee-only financial advisors that only do investment management. They provide investment advice and manage your portfolio. They do not do financial planning.  Fee-only financial advisors that offer both financial planning and investment management (known as a wealth advisor). Myself and my firm fall into this category. How are fee-only financial advisors compensated? 
Hourly: Typically those who aren’t managing portfolios Flat Fee: This could be for ongoing investment management or project-based Assets Under Management (AUM) model: You’ll be charged a percentage of your overall assets (the standard is 1%) for annual ongoing wealth management that includes financial planning. When you make more money, your financial advisor makes more money because their fee is tied to the value of your portfolio. 
How do you know which option is the best for you? Learn more in this episode. 
Resources Mentioned Retir