Sometimes it can be difficult to explain the cultural differences between financial planners and wirehouse brokers, especially when many wirehouse brokers give their agents the job title “financial planner”. However, there are very distinct differences. Below is a short explanation of the general differences in nature of fee-only financial planners opposed to brokers.
Financial Planners
- Advisers are sworn to fiduciary standard(Investment Advisers Act of 1940), meaning recommendations must be in the best interest of the client even if it means ahead of the planner’s own interest.
- In the case of Timothy Financial Counsel, no trading rights are given to the adviser, rather there is only objective advice.
- No products and/or financial instruments are sold. Financial planners typically have a focus on a holistic view of their entire financial situation, not just their investments.
- Service is given at a fee -whether hourly, per service, or as a percentage of assets- but nothing is incentiving the advisor to sell any products to the customer or produce commission profits.
- Should have the CFP (Certified Financial Planner) certification.
Wire House Brokers
- Brokers are held to the suitability standard, meaning recommendations they make need only be suitable enough for clients.
- Brokers are typically engaged in the central business of effecting transactions in securities for the account of others.
- Broker-dealers are able to have trade authority while also having the ability to sell financial instruments/products.
- Brokers earn commissions for each product they sell.
- Wire house brokers, being affiliated with their firm, gain access to that particular firms proprietary investment products, research, and technology.
- Must be certified in Series 3 to become a commodity broker or certified in Series 7 to become a stock broker, but no requirement to have any financial planning education.