Kathleen Owens
Kathleen Owens
Many think that all financial advisers are about the same, but nothing could be farther from the truth! It is unfortunate that all financial advisers are not all held to the same rules and regulations.
There are two types of financial advisers. The first conducts business on a transactional basis. This type of adviser is paid a commission when he/she buys and sells investments for their client. These commissions, sales charges, and other fees are often not reasonably disclosed to the client, and most of these charges are not disclosed on the monthly account statement. These commissions and fees are disclosed on the mutual fund prospectus or in lengthy client agreement documents or trade confirmations.
It is often difficult for the average client to figure out what they are paying with this type of arrangement. These advisers work on the basis that the investments he/she recommends are suitable for the client, but do not have to be in the best interest of the client. These advisers are referred to as brokers, and hold a Series 7 Securities License, and also hold the 63/65 or 66 Series Securities License. They are dually registered and often employees of a Broker–Dealer.
The second type of adviser is paid a fee for their advice. Their business is giving advice. This type of adviser never receives commissions for any of the investments that they buy or sell for their client. Most often, this type of adviser is a more affordable option. This adviser is a fiduciary and gives advice that is in the best interest of their client. They are less conflicted because they are not dependent on selling in order to earn income. The Securities and Exchange Commission regulates registered investment adviser representatives. Working with a registered investment adviser representative is more transparent because there aren’t any hidden commissions or fees. The adviser’s fee is disclosed on the client’s monthly statement.
These advisers hold a Series 63/65, 66, Securities License, and/or: Chartered Financial Analyst, Certified Financial Planner, Chartered Investment Counselor, or Personal Financial Specialist designation.
Many investors are learning of this difference and are voting with their wallets. Registered investment advisers have been the fastest growing category in the U.S. wealth management market, with a 12% growth in assets under management since 2016.
Over the past five years, 22 million more individuals have engaged an investment adviser for asset management.
Kathleen Owens, is a Fiduciary, Fee-Only Registered Investment Adviser Representative and Certified Financial Planner candidate with Aurora Financial Planning & Investment Management LLC. She can be contacted at 858-205-7651 or [email protected].