Much is being said regarding the changes happening in the financial services industry right now. You may have heard some news stories through the media regarding disclosure, compensation, and fiduciary responsibility. Those that are already disclosing fees, advisor compensation, and are a fiduciary are already operating on these parameters; those that are not conducting their business in this way are opposing changes to the industry. Unfortunately, it has left some financial clients confused.
As a client, you have the right to choose the model works best for you when you choose a financial professional to work with. However, you need to be informed of the differences and should feel comfortable asking questions pertaining to fees on your accounts, how much your financial professional makes from you, and if they operate as a fiduciary. Here are some key differences that impact what you pay for in working with your financial professional:
A Financial Advisor
Is a fiduciary that has a legal and moral responsibility to take care of your assets and act in your best interest; this is a financial advisor (person) who works for a Registered Investment Advisor firm and holds a Series 65 or 66 license in addition to other licenses. They are compensated for the advice they give and the management of your assets, based on a percentage of assets under management.
A Registered Representative (Financial Representative)
Is a professional who is compensated based on the products they recommend when you purchase those products or buy or sell shares in your accounts. They typically work for a broker-dealer or an insurance company and represent the products those two entities sell. They may or may not offer financial advice and can’t charge for it. The license they hold that designates them as a representative is a Series 63 in addition to others.
Many financial professionals have numerous securities licenses that allow them to work with specific investment vehicles and may choose to have advanced designations obtained through additional specialized education. All licensed individuals need to complete continuing education on-going to remain licensed.
When it comes to fees on your account, there is no such thing as a ‘fee-free’ investment. You will either pay fees upfront when you buy a product or shares or pay fees that are included in the assets under management through your agreement with your financial advisor. Regardless, there is a way to compare fees of both financial professionals which should be disclosed to you when you decide to do business with that person. All you need to do is ask so that you know what you’re paying for. We welcome your questions regarding how we are compensated for working with you.
Contact our Las Vegas Financial Advisory office to learn more.
