Fiduciary Advisors
There are two types of financial advisors that can help you invest your assets: Fidicuary Advisors and sales representatives. Each type of advisor has its own unique characteristics.
Fiduciary Advisors
This advisor type has the following characteristics:
- They are Registered Investment Advisors (RIAs) or Investment Advisor Representatives (IARs). IARs are employed or licensed by RIAs.
- They are held to higher ethical standards than the other type of advisor.
- They are required by law to put investor interests ahead of their own interests.
- They are compensated with fees to help investors achieve their financial goals.
- They are paid ongoing compensation to provide ongoing services, for example performance reports
- They have more liability for the quality of their advice.
Sales Representatives
This advisor type has the following characteristics:
- They hold securities licenses (Series 6 or 7) that permit the sale of investment products.
- They may also hold insurance licenses that permit the sale of insurance products.
- They are supposed to make suitable recommendations, but are not held to higher ethical standards.
- They are compensated with commissions to sell investment and insurance products.
- They make recommendations, but don't give advice.
- They have little or no liability for the quality of their sales recommendations.
- They don't provide ongoing services because they don't receive ongoing compensation.
The Best Advisor
Investors have a very clear-cut choice when they select a financial advisor. It's easy to see why they should only select Fiduciary Advisors to help them invest their assets. Fiduciary Advisors are paid to help them achieve financial goals and sales representatives are not.
Market Dominance
Unfortunately, most investors with assets under $3 million are dominated by sales representatives who are stock brokers and insurance agents. They may use different titles to hide their sales role, but based on their characteristics they are sales representatives.
They dominate the market for three reasons:
- They market themselves and their products more aggressively than Fiduciary Advisors.
- They outnumber Fiduciary Advisors by at least twelve to one.
- nvestors don't know the critical differences between Fiduciary Advisors and sales representatives.
