Long ago, in a galaxy far away, bankers made loans, agents sold insurance and stockbrokers sold stocks. Everyone stuck to their turf.
In the 1980s, everything changed. Stockbrokers started selling insurance. Banks offered investing advice.
Insurance firms realized they had to compete, so they started offering investment products. They all had different cultures. Agents and advisors were caught in the middle.
The types of advisors available in the field began to change. Even people in and around the financial services community might hear, and use different terms to refer to advisors without knowing exactly how everyone else is defining those terms. Here's how I define the six different types of advisors.
How Am I Qualified to Define Types of Financial Advisors?
You might ask: What qualifies me to write about different types of financial advisors?
For starters, I was a financial advisor for 14 years of my 20-year career with a major financial services firm.
Since starting my own business in 2001, where I focus on training financial advisors in client acquisition, I've met or worked with advisors in all six types of firms listed. Some started in one category and transitioned to another because they felt it was a better fit.
Here's another point you might raise: These are generalizations.
Not all firms in a category are the same. That's right.
However, I think you can assign broad attributes to many firms in each category.
6 Types of Advisors, Doing Similar Jobs
The general public might paint all financial advisors with the same brush, considering them commission salespeople.
There are actually six common types of advisors out there:
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Wirehouse Financial Advisors
Think of a Roman galley. Very structured. Large offices in major cities. They usually have strict asset minimums, often in the $250,000+ range. They do business according to a defined model involving financial planning that identifies a risk tolerance which drives asset allocation. Few advisors do individual stock selection. They use mutual funds, ETFs and managed money, packaged in a recurring wrap fee structure.
Who gets hired? Second career types.
Training: Extensive training often lasts three to five years before graduation, often as team members, less frequently as sole practitioners.
Success: Based on the new accounts and new assets. You find your own clients.
Compensation: Based revenue generated. Fees from wrap structure repeat year after year.
Product Range: Almost everything including mortgages and insurance. They aren't insurance or mortgage experts but they have specialists.
Collaboration: Refers to other professionals, expects referrals back.
Firm Risks: Recruiting. Many competitors prefer to let them do all that training, then hire them away with a large comp package.
Regionals and Super Regionals
An alternative between wirehouses and RIAs. They are often sought out by established advisors who don't like the rigid wirehouse structure. They see themselves as relationship driven, not product driven.
Who gets hired? – Often it's experienced advisors from wirehouses seeking individuality.
Training: If they hire experienced advisors, they have licenses. Some hire new people, training in branch and home office.
Success: Same as wirehouses. Business is often planning driven.
Compensation: Similar to wirehouses. Payouts may be higher.
Product Range: Extensive offering like wirehouses, yet advisors may have more choice in how they do business.
Collaboration: They encourage advisors to develop relationships with centers of influence (COIs).Firm Risks: Losing advisors to competitive recruiting. Visibility in metro markets dominated by major banks and financial services firms.
Insurance Firm Financial Advisors
Usually advisors who specialize in insurance and also have the capability to do business in investment products. Firm often has a great reputation and market presence.
Who gets Hired: Second career people, firms do send representatives to job fairs and colleges.
Training: It varies by firm, yet training might be three months, then you go live.
Success: It's an insurance company. You want to do extremely well in core products, specifically life and disability insurance.