Enter multiple symbols separated by commas

When Shopping for an Advisor, Know the Pros and Cons

Three business professional
Nicolas Hansen | E+ | Getty Images

When choosing a financial professional, keep in mind that there are three distinct categories.

(Read More: Even Skilled Investors Can Use a Financial Advisor)


Brokers can provide advice and planning services and manage your portfolio. Importantly, they are compensated through the commissions they earn when they sell you investments. Since different investments pay higher or lower commissions, this can create conflicts of interests. Brokers are often backed by the considerable research and other services of big parent firms such as Merrill Lynch. They are regulated by the Financial Industry Regulatory Authority, a "self-regulatory organization."

Investment Advisors

Like brokers, investment advisors can provide advice, planning and portfolio management. In an effort to limit conflicts of interest, they are compensated for their advice rather than for selling products. Advisors charge ongoing fees (typically 1 percent of your account assets annually) which can add up to a considerable sum over time. They are regulated by the Securities and Exchange Commission.

Financial Planners

The financial planner category is the most loosely defined and least regulated of the three groups. The services planners provide can range from recommending a few products to designed an agenda on a full range of financial matters. Many investors hire financial planners on a one-time, hourly basis. Certified Financial Planner and Certified Financial Analyst are two respected credentials for planners.

Contact Advice & Advisor


    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Latest Special Reports

  • Business icons and provocateurs share their innovative models. Learn how to upend old industries, and start new ones.

  • A look at 50 private companies set to reshape the business landscape.

  • Whether you're young and just getting started investing or moving closer to retirement, factoring in age will keep you ahead of the game.

Financial Advisors