What's The Difference?

Many times I hear people speak of financial advisors, brokers, insurance agents, or financial planners as if they all mean the same thing. No soapbox here, but there are very important differences and all differences are first tied to licenses and then to the company supporting them.

First and most important to know is that no one works for free. "They don't charge me for that" is not accurate no matter where you go and no matter what you are referring to. There is always a fee, a charge, or a cost to not paying a fee. Also bear in mind that fees do not guarantee competence.

Financial Advisor is a very broad and over-used term. Basically if you are looking for someone to help you fit all of your financial pieces together by calculating important goals like retirement, education expenses, major purchases, life insurance needs vs. life insurance as an estate plan then you should expect to pay a licensed professional to perform these tasks. These calculations should be reviewed and recalculated regularly so you recognize important changes, short-comings, and success in achieving those goals.

If you know what you're doing or you really don't care if you reach any goals, but you want someone to throw some money into an account and invest it for you then you will pay for that also, but you will pay through your invested assets in one form or another. If I'm keeping this blog simple then detailing various ways you pay for these things would just be too long. Just know that you do pay and it's okay to pay within reason.

A client recently returned to my practice after spending two years at another firm. They initially left because the other firm offered to take their assets and do their financial planning "for free." I didn't say anything at the time knowing that they had to learn on their own. Two years later they called me asking if I would take them back. They realized that what they received from the other firm was similar to a plan, but there was no planning at all. They were just used for their assets and ignored for a year and a half. Of course I took them back and we updated their goals and the analysis of their goals and made minor changes to their strategies and we go skipping off into the sunset.

When someone does extensive analysis and planning they have to be licensed to provide this service and also must be licensed to charge a fee. Because I believe so strongly in what I do, I have to believe that if someone can charge a fee for advice, but they do not ... they don't have confidence in what they're doing or their firm doesn't support providing advice. If they offer to do things "for free" then it is very likely that they aren't licensed to do either.

It all depends on your level of investment and planning knowledge as to whom you should work with.