Choosing the proper investment advisor should be the top priority for anyone looking to grow their wealth, no matter whether you live near Bartley Financial’s offices in Bedford, NH and Andover, MA or on the other side of the nation.

Not everyone seeking an investment advisor will have the same needs, so choosing the right advisor isn’t a one-size-fits-all approach. Similarly, not all financial professionals offer the same investment services.

That means you’ll need to do a little researching to determine which type of advisor is best suited to manage your investment portfolio. Here’s how to narrow down your choices.

Understand the Types of Investment Advisors

Here’s where things really start to get confusing. There are a number of different terms referring to professionals who offer investment management services, each indicating a slightly different type of professional:

Brokers, Dealers, Broker-Dealers

As you navigate through the world of wealth management, you’ll learn that many terms referring to professionals in this realm are not backed by official certifications or regulated by governmental entities. The terms “broker” and “dealer” are exceptions.

Brokers, also known as agents, facilitate brokerage accounts, where investors’ funds are deposited and used to buy and trade securities. Dealers function similarly to brokers, but they buy and trade securities for themselves, whereas brokers do so on behalf of others. Many firms that are brokers are also dealers and are called broker-dealers.

The types of securities that a broker, dealer, or broker-dealer can buy and trade and the extent of their knowledge can depend on the license they have acquired through the Federal Industry Regulatory Authority (FINRA). Three common licenses are:

  • Series 6 – permits professionals (known as limited representatives) to sell mutual funds, variable annuities, and insurance
  • Series 7 – permits professionals (known as registered representatives) to buy and trade most securities except commodities and futures. Also requires professionals to demonstrate knowledge of the tax consequences of investing and investment risk. Professionals with this license are often better suited to work with investors and management retirement plans.
  • Series 63 – Most states require professionals to also pass the Series 63 exam in order to use their Series 6 or 7 licenses as a broker-dealer.

Financial Advisors and Investment Advisors

In some cases, investors do not work directly with a broker or broker-dealer. Instead, they work with a financial advisor or investment advisor. Although these terms are often conflated, there is a difference.

Financial advisor is a broad, unregulated term that is not reinforced by required credentials. Investment advisors, on the other hand, are regulated either by the SEC or a state securities regulator, depending on the amount of money an advisor manages or “assets under management.” These individuals can manage investment portfolios and offer investment advice. To make it even more confusing, investment advisors can also offer brokerage services if properly licensed.

It is not uncommon for investment advisors and financial advisors to overlap. For example, Robert Bartley at Bartley Financial is both an investment advisor and a financial advisor, as well as a CPA.

It’s a good idea to research your options through the SEC and BrokerCheck, both of which offer tools that reveal everything from a professional registration to their assets under management, number of clients, qualifications, disciplinary history, and more.

Understanding the professional credentials of people who may handle your investments will better equip you to entrust the right person with your wealth.

Explore How Investment Advisors Are Paid

One of the most important distinctions to make when choosing an advisor is their compensation structure. Figuring out how an advisor gets paid can tell you a lot about their philosophy and practices. Most advisors are compensated in one of two ways: fees or commissions.

Advisor Commissions

If an advisor earns compensation from commission, that means they get paid each time they sell you a certain investment product. Advisors who work on commission are usually directly employed by a broker-dealer like Ameriprise, Edward Jones,Goldman Sachs, Merrill Lynch, Morgan Stanley, Raymond James, Wells Fargo, and others.

Advisor Fees

Some advisors charge fees for their services. These fees can be based on assets under management (AUM), hourly labor, or investment performance. Advisors typically charge hourly when offering a general finance service (typically in a capacity as a financial advisor), rather than when managing assets and investments (in a capacity as an investment advisor). Percentage-based fees are common for most investment advisors.

Fee-based vs Fee-only

So, there are advisors who charge commissions and advisors who charge fees. There are also advisors who charge a combination of commissions and fees, known as fee-based advisors.

Consider that advisors who earn commissions can be motivated to promote the investments that offer them a larger profit, as opposed to the investments that are in the best interests of their clients. Thus, there can be an advantage to working with fee-only advisors, who are motivated solely by the ongoing satisfaction of their clients.

Consider Advisor Philosophy

When choosing an advisor, you’ll need to go beyond the credentials and find out more about their overarching investment philosophy. The stock market is not black and white; there are many differing ideas about how it operates and how profits are made.

Like all philosophy-based conversations, it’s best to begin by asking pertinent questions. Some examples are:

●      Are they trying to beat the market or match it?

●      What investment strategies do they rely on?

●      What time frames are used to make prognostications?

If you find yourself disagreeing consistently with the advisor on the answers to these and other similar questions, you might have a rocky relationship. Try to find an advisor who inspires your confidence, otherwise you may find yourself feeling stressed.

Search for an Advisory Firm That Employs CPAs

Finally, when searching for an advisor to help manage your investments, it’s a good idea to consider working with a firm that has CPAs on staff. Certified Professional Accountants (CPAs) must complete a rigorous multi-part exam and amass thousands of hours of qualified work experience.

Even if you already have a CPA, chances are they are too preoccupied with tax preparation to spare much time to comprehensive tax planning. Yet, when it comes to investing, tax planning can make a world of difference as it impacts how much of the dividends and returns actually end up in your wallet.

Investment Management at Bartley Financial

Bartley Financial is built around a client-first ethos. We are as committed to exhibiting high levels of professionalism as we are to building relationships with clients built on trust and mutual respect. That’s why we only offer a transparent, fee-only compensation structure, so that our clients never need to be concerned about a conflict of interest.

Bartley Financial has an experienced team of CPAs and CFPs® that help clients manage their investment portfolios, plan for retirement, strategize taxes, or execute any other initiatives in pursuit of optimum financial health and minimal financial stress.

We are experienced and dedicated financial planners and investment advisors. We have experience creating comprehensive strategies to ensure that your wealth is being leveraged to move your goals closer. We execute a core and explore investment strategy that will optimize your ability to meet your goals and live the life you desire. We will start by crystallizing your goals, in order to “Begin With the End in Mind.”

Contact us today to begin a relationship with a team of knowledgeable, trustworthy professionals who put their clients first.