Financial Advisor vs Financial Broker – Know the Differences

Financial Advisor vs Financial Broker - Know the Differences

A Financial Advisor and a Financial Broker have distinct roles in the financial industry. One is inherently different from the other. It pays to know what sets them apart and how their job descriptions differ to enable you to choose the right one for your financial goals. Fortunately, we’ve broken it down for you. So read and be enlightened!


What Does a Financial Advisor Do?

A financial advisor provides adequate financial guidance to individuals, businesses and organizations to help them make smart financial decisions and build wealth. Advisors typically boast a professional financial certification that qualifies their distinct roles. For instance, to qualify as a financial advisor in the UK, you must hold an ideal qualification recognized by the Financial Conduct Authority (FCA).

They also double as investment advisors, offering tools that guarantee long-term financial security. They assist clients to help them maintain and manage their investments and cover primary financial areas like taxes, contracts, balance sheets, insurance and budgeting. Financial advisors assess the suitability and feasibility of potential investments for their clients so they can make a sound decision. And in some cases, they can buy stocks and bonds for their clients, provided they have the authority and license to do so.

What Does a Financial Broker Do?

Financial brokers like advisors help clients make sound financial decisions, but this is limited to securing investments and loans. They are market experts that are in tune with the dynamic changes that rule the stock market and various financial fields like property, loans and bonds. Brokers have different job designations that serve to help individuals and organizations secure financial products for wealth management and creation. Financial brokers also assess and evaluate financial information provided by their clients, keep sensitive information confidential, and document all proof of financial transactions made by or on behalf of their clients.

What Sets Them Apart?

The primary difference between financial advisors and financial brokers is the fiduciary standard. A fiduciary means the financial entity always must act in the best interest of their clients. While financial advisors are obligated to obey the fiduciary law, financial brokers aren’t obligated to do so. Financial brokers have the free reign to be fiduciary or not (though the best ones act as fiduciaries)

As Fiduciaries, financial advisors are highly expected to dedicate more care and effort to their clients’ financial proceedings. As such, they are trusted to make decisions on your behalf without prior permission. For example, a financial advisor can make trades on your account without informing you, but a broker has to get your authorization before negotiating deals in your name.

Also, fiduciaries aren’t entitled to commissions, they operate under the fee-only criteria, which means they are paid a flat or hourly fee. They also make their keep from a percentage of assets under their care (which is usually 1% or 2%  of the total assets being managed).

Note that, the UK doesn’t hold its advisors and investors to high fiduciary standards as the related laws aren’t clearly defined.

Which Makes More Sense?

It all depends on the services you are looking for and how much you are willing to pay. If you want to buy or sell stocks, bonds or lend money, a financial broker is best suited to serve your needs. But if you want guidance on how to make the most use of your assets, you should seek a financial advisor. However, bear in mind that advisors come with a steep price tag as they offer a broad range of services — thus, they may be out of bounds for up and coming investors.

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Dustin Garza has made a fortune investing in the stock market, as well as making small investments in startup companies that end up flourishing later on. Dustin is always happy to share his investment and business tips and comment on the state of play from a variety of interesting angles.