What is the difference between a broker and advisor?
When searching for an investment professional, you will come across many job titles: financial advisors, wealth managers, financial planners, and investment advisors. To simplify, let’s compare the two main camps advisors fall into — brokers and investment advisors.
A broker sells financial products. While brokers used to pitch stocks, now they sell things like mutual funds, variable annuities, and Real Estate Investment Trusts.
An investment advisor provides advice. They can give investment recommendations, build a financial plan, or manage investments.
A broker is paid by commission. A commission is an amount of money paid to the broker that sold the financial product. While it comes from the company who made the financial product, it is paid by you, the customer, one way or another.
Advisors are paid by fees. An investment advisor is compensated by the client. Commonly, a percentage of the investment balance is charged by the advisor to manage the account. Even if an investment advisor uses mutual funds in his investment portfolio, he receives no commission or kickback from those mutual fund companies.
An advisor is held to a higher standard. An investment advisor is held to a fiduciary standard. Simply put, this means advisors are required to put your interests above their own. A broker’s recommendations must be suitable for the client. This means that he has considered factors such as your age, investment experience, and time horizon when selling you an investment product.
Why does it matter?
The type of financial representative you work with determines the nature of your relationship. While we have touted the benefits of working with an insurance agent or a mortgage originator who is a broker, these benefits are lost when seeking financial guidance.
If your desire is to obtain advice and recommendations from a financial expert, we think working with an investment advisor is best. This is why Stewardship Financial is a Registered Investment Advisor (RIA). As an RIA, we employ investment advisors who are ready to help you reach your financial goals.
If you’d like to learn more about what Stewardship Financial can do for you, let us know today. Click here to contact us!
This post was originally posted at http://moneywellrooted.com/2017/05/30/what-is-the-difference-between-a-broker-and-advisor.
