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Finding a Financial Planner Thumbnail

Finding a Financial Planner

Planning to retire from work someday and enjoy well-deserved time off is a common goal and one that is attainable for many. But to reach that goal requires not just a sound work ethic, but careful and strategic financial planning. For busy business owners, finding the time is just one challenge of creating that plan. The bigger roadblock is identifying the right financial advisor, choosing between a brokerage house, fiduciary firm, or some type of hybrid.

We look at the three types of financial advisors and share thoughts on which may be best for you.


The three types of financial advisors are broker-dealer, Registered Investment Advisor, and a hybrid between the two.

Advisors must follow either fiduciary or suitable standards. 

How advisors are compensated varies and can open up conflicts of interest. 

Types of Investment Advisors

There are essentially three types of Security Registrations to consider when choosing an investment advisor or manager—a broker-dealer, a Registered Investment Advisor (RIA), or a sort of hybrid. All keep ledgers of the owners of securities since most securities for sale on a national securities exchange are registered with the Securities and Exchange Commission (SEC) and are subject to financial disclosure and reporting regulations. When investing, you are choosing who to trust to hold your information and provide advice on securities.


Fiduciary Vs. Suitability Standards

A broker-dealer representative is licensed through a financial firm such as a brokerage and represents clients who are trading. A broker-dealer is held to what’s called a suitability standard meaning advice offered must be suitable for the client based on his investor profile that includes age and risk tolerance. They are regulated by the Financial Industry Regulatory Authority (FINRA) which is a self-regulatory organization for the securities industry.

An RIA generally works for a more boutique firm or as a solopreneur and uses investments as just one part of a full financial planning strategy. RIAs are held to the more stringent fiduciary standard by the SEC that requires the advisor to always put his client’s best interest as the priority. They are registered with the Securities and Exchange Commission (SEC) or their state securities regulator.

The hybrid advisor is registered with both the SEC and FINRA but may or may not be a fiduciary.

Commission Vs. Percentage Based Fees

Next, we compare how each is compensated.

A broker-dealer is usually commission-based getting a fee based on the investment products they recommend or sell. As you might imagine, this can set up conflicts of interest where a product that offers the broker a higher commission may be more appealing to push to clients. This is not to say brokers always put themselves first, but the client has little protection or recourse if he feels his best interests are not being met.

The RIA is paid either a flat fee, or a percentage of the assets managed. This payment structure reduces the risk of conflict of interest. In fact, as a fiduciary, the RIA is required by the SEC to disclose any potential conflicts of interest or to just take such products off the table from the start. At PNWA we simply don’t conduct sales nor offer sales advice. We will offer you objective advice on the types of solutions that could work for you, but for any sales, we will refer you to one of our trusted partners.

Hybrid advisors work on both fee-based compensation and commission-based compensation. The risk of receiving advice that may not be in your best interest is there, but you can control that a bit by agreeing to payment terms upfront. 

Financial Advising

Finally, how does each type of financial advisor interact with clients?

A broker buys and sells securities under your authorization. You make the decisions, but the broker puts the options in front of you. For someone who may not have a lot of investable assets to manage or who is quite familiar with securities and his own needs and requirements, a broker is a more cost-effective choice. The broker does not get paid to advise you but more to buy and sell as you wish.

An RIA manages your portfolio on a day-to-day basis and works closely with you to ensure investment decisions are made based not just on your current situation, but on where you want to be in the future. You pay an RIA for his advice. For those with more wealth to manage and complex investments, this is a better choice.

As a fiduciary firm, PNWA will always act in your best interest, and to do this most effectively we take the time to really listen to not just what your assets are but also to your goals and aspirations. When we truly get to know you, we can anticipate changes and challenges in your life and proactively identify solutions to ensure you stay on the right financial track. Contact us if we sound like the right fit to plan your financial future.