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What Are the Different Types of Financial Advisors?

  April 28, 2020  |    #General

How to pick your perfect financial advisor

If you’re new to investing or need specific help in planning for the future, you may want to seek out a professional opinion. So, what are the different types of financial advisors and how do you pick the one that’s best for you?

Do you need a financial advisor? Hear which is right for you:

What you should know about financial advisors 

On this episode of the Queer Money® podcast, I’m addressing Zack’s question about the different types of financial advisors. I share the results of the Queer Money Facebook poll on using a financial advisor and explain what you need to know about a fee-only versus a fee-based advisor.

I go on to discuss the characteristics of a fiduciary and non-fiduciary advisor, describing which one is required to put your best interests first and what you can learn about a prospective financial advisor from their Uniform Application for Investment Registration or ADV form. Listen in to understand the differences among a robo-advisor, an online advisor and a traditional advisor and learn how to choose a firm that supports the LGBTQ community!

Data has shown that, over time, financial advisors typically perform better when the market is down and not as well when the market is going up.Click To Tweet

Topics covered on picking a financial advisor

The results of the Facebook poll on using a financial advisor

  • 24 do it on their own
  • 18 curious about using one
  • 9 have one now

What you need to know about fee-only financial advisors

  • Only paid by clients (flat fee, hourly or % of AUM)
  • Can’t be paid by fund companies or referrals
  • Can’t earn commission on product recommendations
  • Typically acts as fiduciary

What you need to know about fee-based financial advisors

  • Can be paid by clients AND fund companies, referrals
  • Can earn commission on product recommendations
  • Typically not acting as fiduciary

Why you need to ask prospective financial advisors for their ADV

  • Explains services, fee schedule, conflicts of interest, etc.
  • Outlines educational and business background

The characteristics of an advisor acting as a fiduciary

  • Put their client’s best interests before their own
  • Avoid/disclose potential conflicts of interest
  • Provide relevant facts, accurate advice

What characterizes a non-fiduciary financial advisor

  • Still required to fulfill client suitability rule
  • May be loyal to broker-dealer over client
  • Less strict rules regarding disclosing conflicts of interest

The pros and cons of using a robo-advisor

  • Lowest barrier to entry, low management fees
  • Zero to minimal human contact (online survey)
  • Best when just starting out with investing

The pros and cons of using an online advisor

  • Low barrier to entry, open with $0 to $25K
  • Moderate management fees (.25% to 1%)
  • Human contact varies by fees paid
  • Best when you’re starting + have $ to invest

The pros and cons of using a traditional advisor

  • Highest barrier to entry, a minimum of $100K
  • Management fees 1% or more (graduated fee scale)
  • A dedicated advisor offers holistic advice
  • Best for those with much $ to invest, specific needs

How to choose an LGBTQ-friendly financial advisor

  • Research kinds of firms want to work with
  • Check membership in local LGBT Chamber of Commerce

Resources on financial advisors

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