Is Your Investment Adviser Working in Your Best Interests?

On the other hand, investment advisers provide ongoing financial advice and may directly invest for their clients. They are registered with Securities and Exchange Commission (SEC) or a state securities regulator. Investment advisers often charge an ongoing fee based on the assets they manage for you. If an investment adviser employs a separate broker to hold (custody) your assets, the adviser may be a fee-only adviser. Fee-only advisers generally do not earn trade commissions and only earn their ongoing fee based on the amount of assets they manage and invest for you.

Blurring the Line

However, the distinction between investment advisers and brokers has become complex. Many investment professionals straddle both categories—they sometimes act as a broker and as an investment adviser at other times. You may see brokers identify themselves as financial advisors or investment advisors. (Note “advisors” spelled with an “o” instead of an “e.”) It is important to know the difference between advisor and adviser. Some brokers have started registering as both brokers and investment advisers. Other financial professionals may call themselves wealth managers or financial planners.

With these dually registered advisers, it can be tough to know exactly what fees clients pay and what services the professionals provide to their clients. Since investment advisers generally charge advisory fees and brokers generally earn commissions, dually registered professionals may use a “fee-based” model that allows them to potentially charge an advisory fee as well as earn commissions for trades in client portfolios. Fees are just another reason it is important to understand the difference between the adviser title and other titles such as financial advisors, investment advisors, financial planners and wealth managers. Knowing a financial professional’s fee structure can help you understand their firm’s structure and how they make money on client portfolios.

How Can You Be Sure You’re Getting the Best Advice?

Make sure the financial firm offers the right service for you. If you are looking for ongoing investment advice rather than simple transactional help, you may be best served choosing an investment adviser to manage your investment portfolio.

Trying to figure out financial professional titles and services can be complex. But knowing the differences between the types of financial professionals can be crucial since clients are putting their faith in someone to help them invest their portfolios. To find out if a person is a broker, investment adviser or both, it is a good idea to ask the following clarifying questions:

• Are you a registered investment adviser or a broker?
• Are you and your firm registered with the SEC, the state administrator or the Financial Industry Regulating Authority (FINRA)?
• Aside from what I pay you directly, what other compensation do you receive?
• Will you receive commissions from transactions made in my account?

How Fisher Investments Can Help

Fisher Investments is an investment adviser and has been since our founding. Our personalized investing services, transparent fee structure and portfolio management differentiate us from the traditional broker model. If you are interested in finding out more about our firm or learning more about the financial industry, call and speak with one of our qualified professionals or download one of our educational guides.