Types of “Financial Advisors”
Newman’s Financial Planning, LLC is a registered investment advisor and is required by law to act solely in our client’s best interests.
My Fiduciary Oath to you:
- I will always put your best interests first
- I will act with prudence; that is, with the skill, care, diligence, and good judgment of a professional
- I will not mislead you, and I will provide conspicuous, full and fair disclosure of all important facts
- I will avoid conflicts of interest
All Investment Advisors are considered to be a “fiduciary”, which means they must act solely in the best interests of their clients. This is a term that is covered under the Investment Advisors Act of 1940. This act was put in place by the Federal Government to protect investors against any malpractice, or wrongdoing and helps provide much more transparency to clients. In my personal opinion I am not sure how anyone can be in our business and not be acting solely for the clients best interest.
A Broker is an “agent” who works for a large or small investment firm that is in the business of selling or placing trades. They are in the business of transacting for clients accounts in which such transactions pay these Brokers a commission. Brokers are also compensated by transaction fees, incentives, and bonuses their employer may offer. Often times Brokers are limited to the types of investment vehicles they can offer clients. Due to the nature of this role, Brokers do not act as a fiduciary and are specifically exempted to act as a fiduciary for clients, and also not required to abide by the Investment Advisors Act of 1940.
There are many other “investment professionals” out there that claim they are financial advisors. One common one is an insurance agent that is in the business of selling variable annuities or whole life policies. They again are not held to a fiduciary standard. They are compensated much like stockbrokers receiving commissions for the different types of insurance products they sell. Often times these insurance products have very high hidden fees built into the policies.