BUFFALO FINANCIAL ADVISORS

Types of Financial Advisors

One of the main responsibilities of a financial advisor is to provide clients with a sound and competent financial advice. However, in the world of financial planning, it is possible that the advice is affected by the type of compensation received by the advisor.

There are primarily two types of advisor: a commission-based advisor and a fee-based professional. Although both may offer the same services, these two kinds of financial advisor may have different advising slants.

As a client, it is only essential that you know the difference as well as the pros and cons of hiring a commission-based councilor versus a fee-based one. Remember that one of these professionals will be assisting you in making crucial financial decisions, so it is fitting that you decide which works best for you.

Here are some points to consider about commission and fee-based financial advisor:

Commission

Commission based advisors are the ones who receives remuneration by selling their company’s products and services to clients. For example, if you invest in foreign exchange or stocks, your broker will also earn part of your income whenever your investment makes money.

They commonly work for financial service providers or companies. They are often referred to as brokers and tied-in agents.

Pros:

Since commission –based advisors are part of a company, you will be sure that the advisor is well trained, competent, and highly qualified.

Cons:

Commission –based advisors are more expensive as compared to fee-based advisors. A

Reason behind this is because most of them already have a fixed commission rate. Thus, if you have an advisor with a 5.75% front end commission, it will automatically cost you $5,750 from your initial investment of $100,000. This means that if your investment earning continues to increase, so is the rate of your financial advisor.

Fee-based

A fee-based financial advisor is a professional who charges the client with fixed fee or rate. The charge can either be hourly or per consultation. They are often referred to as independent advisors primarily because they can recommend products from any source.

Pros:

The client does not have to worry about conflict of interest since the advisor does not represent any company or provider. This means that the client is given a wide array of services and products to choose from.

Cons:

Up-front charges.

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