According to industrial studies, working with a professional broker or advisor has the potential to add 1.5% to 4% to your portfolio returns. However, the actual figure will depend on your financial literacy the degree of knowledge they can contribute above and beyond your own. If they are able to introduce you to new assets types with which you’re not familiar, you might reap greater gains.
Today, there are numerous investment options, ranging from stocks and bonds to real estate investment and cryptocurrencies. It can be challenging to know where to start or which option is best for you. Additionally, choosing between a broker and an investment advisor can be confusing.
So, broker vs investment advisor, who is the right professional to help you manage your investment portfolio? And what’s the difference between the two? Read on to understand the differences and determine how to choose the best option for your investment portfolio:
Who Is an Investment Broker?
An investment broker is a professional who helps investors buy and sell securities. A security is just a fancy term for a financial instrument, most often a stock, bond, or option.
Investment brokers can be either full-service or discount brokers.
Full-service investment brokers offer a wide range of services, including investment advice, retirement planning, and tax preparation. Discount investment brokers provide only basic services, such as executing trades.
Investment brokers are licensed by the Financial Industry Regulatory Authority (FINRA). Investment brokers must pass the Series 63 or 65 exams to become licensed.
Who Is an Investment Advisor?
An investment advisor is a professional who provides investment advice to clients. Investment advisors are typically registered with the Securities and Exchange Commission (SEC) as Registered Investment Advisors (RIAs).
To become an investment advisor, one must pass the Series 65 or 66 exams. Investment advisors must also adhere to a fiduciary standard, which means they must act in their clients’ best interests.
Advisors also charge a fee for their services. This can be either an hourly rate or a percentage of assets under management.
Before hiring an investment advisor, be sure to ask about their fees and why they choose that structure.
Responsibilities of an Investment Advisor
If you want to work with an insurance advisor, make sure to understand the scope of their responsibilities versus your own. This will help you know what to expect from the advisor and what they should be doing for you.
An investment advisor’s primary responsibility is to provide investment advice to clients. This includes making recommendations about what securities to buy and sell and when to buy and sell them.
Investment advisors also provide guidance on asset allocation and portfolio management. They may also provide other services, such as tax preparation and estate planning.
When choosing an investment advisor, it’s important to find someone who aligns with your investment philosophy. You should also consider an advisor’s experience, credentials, and fees.
Broker Vs Investment Advisor: What’s the Difference?
So, what’s the difference between an investment broker and an investment advisor? Below are key differences between the two:
Difference in Regulations
Investment brokers are licensed by FINRA and typically earn commission on their trades. On the other hand, investment advisors are registered with the SEC as RIAs and must adhere to a fiduciary standard.
This means advisors are healed to a higher standard than brokers and must always act in their clients’ best interests.
Fee Structure
Investment brokers typically earn a commission on each trade. The commission may be a percentage of the trade value or a flat fee. On the other hand, advisors typically charge an annual fee based on a percentage of assets.
The fee may either be a percentage commission or a flat rate based on the services you need. When charging a fee, it’s usually a percentage of assets under management (AUM).
Differences in Testing and Licensing
Investment Advisors are held to a higher standard when it comes to testing and licensing.
They must pass the Series 65 exam before even starting working with clients. This exam tests for competency in investment management and securities analysis.
On the other hand, Brokers are only required to pass the Series 63 or Series 66 exams. These exams test for knowledge of state securities laws and regulations but not necessarily for investment expertise.
So if you’re looking for someone to help you manage your investment portfolio, an Investment Advisor is typically the better choice, because they are more heavily regulated and have to prove their competency before they can work with clients.
Do You Need an Advisor or a Broker?
Between an investment broker or an investment advisor, who would benefit your portfolio more? The answer to this question depends on your individual investment goals and objectives.
If you’re looking for someone to provide comprehensive financial planning services, an investment advisor may be better. However, if you’re looking for someone to execute trades, an investment broker may be a better option.
For example, if you’re looking to grow your real estate investment portfolio, an investment advisor can help you develop a strategy and select the appropriate investments. However, if you’re looking for someone to handle the day-to-day management of your portfolio, an investment broker may be a better option.
If you’re looking to place part of your investment funds into real estate, specifically, then check out this site to find the skilled investment advisors for real estate.
How to Choose the Best Investment Advisor or Broker for You
Investment advisors and brokers have different responsibilities and tasks. Both professionals work in the securities industry to help you grow your investment portfolio. However, they have different levels of experience and expertise.
Here are a few things to consider when choosing an investment advisor or broker:
- Their experience and expertise
- The fees they charge
- The services they offer
- Your investment goals and objectives
It’s important to choose an investment advisor or broker that meets your specific needs. Be sure to do your research and ask plenty of questions before making a decision. The right advisor or broker will help you reach your long and short-term financial goals.
Hiring the Best Professional for Your Investment Goals
Now that you know the difference between a broker vs investment advisor, it’s time to choose the best professional for your needs. Consider your investment goals and objectives, and then compare the experience and fees for each type of professional.
Whether you’re looking to invest in stocks, real estate, or other opportunities, the right broker or advisor can help you reach your financial goals.
For more tips on how to create and grown an investment portfolio, explore the Finance Section of this site.