Fee-only Financial Advisor

A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory body in order to provide advice.

In the United States, a financial adviser carries a Series 7 and Series 66 or Series 65 qualification examination. According to the U.S. Financial Industry Regulatory Authority (FINRA), qualification designations and compliance issues must be reported for public view. Details of formal compliance issues can be found on th
Investment Adviser Public Disclosure
(IAPD) website and details of non-formal issues can be found o
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FINRA specifies the following groups who may use the term ''financial advisor:'' brokers, investment advisers, private bankers, accountants, lawyers, insurance agents and financial planners. Financial advisors need to be able to take the full picture of the client's financial situation into account.

Role

Financial advisers typically provide financial products and services, depending on the qualification examinations they hold and the training they have. Financial advisers are registered, not licensed. For example, a licensed insurance agent may be qualified to sell both life insurance and variable annuities, because the insurance agent holds an insurance license and holds the Series 7 qualification examination. A broker (Series 7) may also be a financial planner. Any advisor can say they are a financial planner; they do not have to hold the CFP (Certified Financial Planner) designation to do so. A financial adviser may create financial plans for clients or sell financial products, or a combination of both. They may also provide insight on savings.

Compensation

A financial adviser is generally compensated through fees, commissions, or a combination of both. For example, a financial adviser may be compensated in one or more of the following ways:
* An hourly fee for advisory services
* A flat fee, such as $3,500 per year, for an annual portfolio review or $5,000 for a financial plan. This is often referred to as "flat fee advisors"
* A commission on the securities bought or sold, such as $12 per trade
* A commission (sometimes called a "load") based on the amount invested in a mutual fund or variable annuity
* A "mark-up": when one buys "house" products (such as bonds that the broker holds in inventory), or a "mark-down" when they are sold
* A fee for assets under management (AUM), such as 1% annually of assets managed

Advisor vs. adviser

Both spellings, ''advisor'' and ''adviser'', are accepted and denote someone who provides advice. According to one textbook, ''adviser'' and ''advisor'' are not interchangeable in the financial services industry, since the term ''adviser'' is generally used "when referring to legislative acts and their requirements and ''advisor'' when referring to a practitioner. Since financial advisor's practiceis never described as an advisery practice, advisor is preferable when not referencing the law." Congress and the Securities Exchange Commission refer to "investment advisers" when discussing regulation of them in the Investment Advisers Act of 1940.

Regulation

United States

Advisors typically fall into two separate categories: broker-dealers (BD) who typically earn a commission from sales and registered investment advisers (RIAs) who typically charge a fee based upon assets under management while serving as fiduciaries and are registered at the state or federal level. Additionally, an advisor can be either affiliated with a large firm ("wirehouse") or be independent (e.g., independent broker-dealer or IBD). There are also "hybrid RIAs" who are both broker-dealers and registered.

The number of independent broker-dealer firms has declined from 1175 in 2007 to 819 in 2018, while RIA firms have grown from 9,538 to 15,645 over the same time period. As of 2016, the largest IBD firm by revenue was LPL Financial followed by Ameriprise Financial and Raymond James Financial. Edward Jones is another large broker-dealer, and in 2017 stopped selling commission-based funds in response to a best interest fiduciary rule by the Department of Labor (DOL). As of 2019, Merrill Lynch had not adopted an RIA model while Wells Fargo and Goldman Sachs had opened up to the business model. As of 2019, the largest fee-only RIA firm was Edelman Financial Engines with over $200 billion in assets under management, under the ownership of private equity firm Hellman & Friedman. Other large fee-only RIA firms include Fisher Investments, which has over $120 billion in assets under management. As of 2019, 80% of the $4 trillion managed by RIAs were on one of four platforms: Fidelity Investments, Schwab, and Pershing LLC. Some RIAs operate inside "RIA aggregators" which provide institutional support similar to a wirehouse.

In the United States, the Financial Industry Regulatory Authority (FINRA) regulates and oversees the activities of brokerage firms, and their registered representatives. The Securities and Exchange Commission (SEC) regulates investment advisers and their investment adviser representatives. Insurance companies, insurance agencies and insurance producers are regulated by state authorities. Investment Advisers may be registered with state regulatory agencies, the Securities and Exchange Commission, or pursuant to certain exemptions, remain unregistered.

Fiduciary standard

The anti-fraud provisions of the Investment Advisers Act of 1940 and most state laws impose a duty on Investment Advisors to act as fiduciaries in dealings with their clients. This means the adviser must hold the client's interest above its own in all matters. The SEC has said that an adviser has a duty to:

*Make reasonable investment recommendations independent of outside influences
*Select broker-dealers based on their ability to provide the best execution of trades for accounts where the adviser has authority to select the broker-dealer.
*Make recommendations based on a reasonable inquiry into a client's investment objectives, financial situation, and other factors
*Always place client interests ahead of its own.

Since the financial crisis in 2008, there has been great debate regarding the fiduciary standard and to which advisers it should apply. In July 2010, The Dodd–Frank Wall Street Reform and Consumer Protection Act mandated increased consumer protection measures, including enhanced disclosures and authorized the SEC to extend the fiduciary duty to include brokers rather than only advisers regulated by the 1940 Act. As of July 2016, the SEC has yet to extend the fiduciary duty to all brokers and advisers regardless of their designation. However, in April 2016, the Department of Labor finalized a thousand-page rule holding all brokers, including independent brokers, working with retirement accounts (IRAs, 401(k)s, etc.) to the fiduciary standard.

In June 2016, as a way to address adviser conflicts of interest, the DOL ruled in a redefinition of what constitutes financial advice, and who is considered a fiduciary. Prior to 2016, fiduciary standards only applied to Registered Investment Advisers (RIAs), and did not impact brokers, who previously operated under a less strict "suitability" standard that provided leeway to provide education without "advice". The new ruling requires all financial advisers who offer advice for compensation to act as fiduciaries and meet the fiduciary standard, but only when dealing with retirement accounts such as IRA or 401(k) accounts. The ruling includes one exemption for brokers, Best Interest Contract Exemption, which can be allowed if the broker enters into a contract with the plan participant and meets certain behavioral requirements. The new ruling does not impact the advice or investment product sales pertaining to non-retirement accounts.

Opposition to the fiduciary standard maintains that the higher standard of fiduciary duty, vs the lower standard of suitability, would be too costly to implement and reduce choice for consumers. Other criticisms suggest that consumers with smaller retirement accounts may be less able