The Four Types of Financial Advisors
Which one should you work with?
We find that, by and large, people seeking financial advice know to look for a financial advisor who has high levels
of integrity and who wants to do what is in their clients’ best interest at all times. But it seems that fewer people
pay attention to the orientation of their financial advisor candidates. As a result, they may risk choosing an advisor
who isn’t a great fit.
Here’s a look at four different types of advisors you are likely to encounter and how they stack up against each
other in some key areas. Armed with this information, you should be able to better assess which type is best
suited for you based on factors such as your goals, the complexity of your financial situation and your net worth.
The wealth management hierarchy
The wealth management hierarchy below illustrates the range, depth and breadth of the financial solutions you
can get from different types of advisors.
Let’s examine each group
1. Investment advisor A good way to think about the wealth management hierarchy is
that it’s progressive, or additive. We start with the base. Investment advisors are
excellent financial professionals who do a very good job managing money—but
that’s all they do.
While investment advisors provide a single solution—money management—
that one solution can have multiple variations (from securities to investments
in private companies, real estate, artwork and so forth).
If all you want is someone who manages your money well—positions your
investment capital, reallocates it as needed and so on—you can stop at
this level. If you want or need expertise beyond money management,
you’ll need to move up the wealth management hierarchy.
2. Financial advisor When you move to the next level of the wealth management hierarchy, more types of
expertise are available to you. Like investment advisors, financial advisors are primarily focused on delivering
money management services and products. However, they also provide some wealth planning services.
The wealth planning capabilities of financial advisors tend to be relatively basic and fall within a fairly narrow
range of expertise. This typically makes them appropriate for individuals and families with lower levels of
complexity in their financial lives. Again, if your financial situation is not complicated, an expert financial
advisor may be what you need to pursue the types of outcomes you want.
Next, let’s look at the two highest levels of the hierarchy and the value they bring.