What Wall Street Doesn’t Would Love You to understand the Independent Financial Adviser

The word independent can be described as autonomous, unbound by another entities force, direction or will, or possibly and most importantly freedom. Nevertheless in the context within your financial advisory relationship independence means much, far more. To learn just why the independent financial advisor model is very vital in your lasting financial success, you need to know the main difference in advisory models coming from the ground level up.

As outlined by market research by Cerulli Associates, a niche polling and research firm, the channels of financial services models might be divided into roughly six major categories:

National Full Service Brokerage — These are generally firms like Merrill Lynch, Smith Barney, Morgan Stanley and Goldman Sachs. An economic advisor at one of these brilliant firms works for their employer directly, but can provide financial advisor services and then sell on you insurance and investment products (maximizing profits and enriching company value). There are approximately 70,000 «financial advisors» at national full service brokerage firms.

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Regional Full Service Brokerage — These are definitely smaller geographically specific brokerage firms such as Robert W. Baird, Edward Jones, and AG Edwards. Regional brokerage firms are nearly just like their national counterparts operating a business model, however they’re smaller in size and typically geographically anchored to service a lesser segment of investors. You will find approximately 15,000 «financial advisors» at these smaller regional full service brokerage firms.

Independent Broker-Dealers — These are firms such as LPL Financial (Linsco Private Ledger), Associated Securities Corp., Ameriprise and ING. An agent-dealer acts as either a sales organization selling consumers investment and/or insurance products OR like a buyer of securities. Some broker-dealers act in both capacities. You can find approximately 100,000 «financial advisors» at independent broker-dealers.

Bank Brokerages — They are banking institutions who in addition offer financial advisor and investment management services on their banking customers. Banks like Wells Fargo, Bank of America and Citigroup offer these types of services and employ roughly 15,000 «financial advisors».

Insurance Broker-Dealers — Firms including The Big Apple Life, ING, AXA Advisors, Equitable, and Transamerica take part in the exchange of insurance contracts and services from company to consumer. You will find roughly 35,000 «financial advisors» in these firms.

Registered Investment Advisor Firms — You can find roughly 25,000 Registered Investment Advisor Firms. An Authorized Investment Advisor (RIA) is actually a firm registered directly along with the Securities and Exchange Commission (SEC) or their state securities licensing division. My firm Red Rock Wealth Management is surely an SEC Registered Investment Advisor Firm. Nearly 1 / 2 of all Registered Investment Advisor firms can also be dealing with or via a broker-dealer (at some level) however to facilitate investment and insurance transactions.

Eliminating the RIA’s with broker-dealer affiliations this simply means roughly 5% of «financial advisors» are solely from the Registered Investment Advisor model.

The words «financial advisors» are in quotations as these firms hold their employees over to people in the financial advisor capacity, yet they might or might not be true financial advisors based upon their employment status. In fact, they are nothing more than facilitators of brokerage transactions for insurance and investment products.


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