How to identify brokers and financial advisers and understand the asset allocation services they provide.
A broker is licensed to buy and sell securities on your behalf. The term "broker" can refer to either a company (e.g., Wells Fargo Advisers) or a person (e.g., Vincent Weir who works at Wells Fargo Advisers). The term "stockbroker" is rarely used and has mostly been replaced by the term "Financial Advisor" or "Financial Consultant" or "Investment Advisor."
There are several types of brokers which vary in terms of cost and the types of services they provide:
- Discount brokers. These firms are described in more detail on the Discount Brokers page.
- Traditional discount broker
- Portfolio-oriented discount broker
- Trading-oriented discount broker
- Full-service brokers. These firms are described in more detail on the Full-Service Brokers page.
- National (also known as "wirehouse")
An advisor provides financial advice and the term "advisor" (also spelled "adviser") can refer to either a company (e.g., SMS Capital Management, LLC) or a person (e.g., Steven Sheldon, the owner of SMS Capital Management). There are different types of advisors including online Robo-Advisors and local Registered Investment Advisors.
And to further complicate things, it's possible for a person to be both a broker and an advisor.
To sort it out, you can ask someone "Are you a Registered Investment Advisor (RIA)?"
- If yes, you can examine their public disclosure form (Form ADV) the Investment Adviser Search page on the website of the Securities and Exchange Comission.
- If no, ask "What professional designations do you have?"
You can also refer to the Directory of Financial Designations, which explains the meaning of the letters after someone's name.
Broker and Advisor Comparison
Discount broker + model portfolio
Local Financial Advisor
Cost. Based on fees for investing $500,000 for 1 year
Advice. Offers advice tailored to your particular situation?
Investment choices. offers both tactical and strategic portfolios?
Rebalancing. Can automatically adjust your portfolio to match the desired asset allocation?
No, but rebalancing tools are available
Other services. Offers a range of other services (banking, insurance, estate planning, annuities, IPOs)?
- VizMetrics model portfolio (Advanced Subscription at $249 per year) + Folio Investing Account ($290 per year for unlimited trades)
- Merrill Lynch Managed Accounts, fee is 1.6% of assets under management (per year)
- Wealthfront, fee is 0.25% of assets under management (per year)
- Typical fee is 1% of assets under management (per year)