This article is part of the Retirement Financial Life Equation (RELE) series. It was initially published on October 4, 2017, and updated in January 2026.
I know what you’re thinking: Oh, fun…another blogger is going to bash my friendly broker or insurance agent.
Well, I’m not out to malign anyone, but I do want you to be on guard against the small percentage of advisors who are greedy and unethical and will take advantage of you if you let them (Matthew 10:16). I want to help you understand this profession—the good, the bad, and the ugly—so that you can make wise decisions about whether to work with an advisor and how to choose one.
This topic is important because, while I favor a do-it-yourself approach to managing your finances, many people who are saving and investing for the long term as part of retirement stewardship choose to work with a financial advisor. And for many people, particularly those facing complex situations or lacking the time, interest, or confidence to manage investments themselves, that can be a wise decision.
In this article, I’m going to focus on what advisors do and the types of companies they work for. In the second, I’ll get into more detail about how they are compensated and what that means to you and your investments. In the third and final article, I’ll discuss how to decide if you need an advisor and how to choose one if you do.
Although I may sound cautionary (and even a little suspicious) at times, please don’t take that to mean I’m against using financial advisors—I’m not. But I do think it’s imperative that you know what services you’re getting, as well as the potential conflicts of interest that could arise if you retain one.
What is a “financial advisor?”
The term “financial advisor” can be broadly used to mean anyone who provides financial advice and services to someone based on their situation. But within that broad category, there are important distinctions you need to understand.
Since I first wrote this article, the SEC has implemented regulations (Regulation Best Interest, or “Reg BI,” effective June 2020) that have somewhat clarified—though not entirely resolved—the distinctions between different types of advisors and the standards they must follow. While these regulations haven’t created the unified fiduciary standard many hoped for, they have raised the bar for broker-dealers and made disclosure requirements more stringent.
There are two fundamental types of financial advisors: investment advisors and investment brokers.
Investment advisors (RIAs)
Investment advisors help their clients plan for long-term goals like retirement. They have a fiduciary responsibility as required by the Investment Advisers Act of 1940 to put their clients’ interests above their own. This fiduciary duty is the highest legal standard of care in the financial services industry.
Investment advisors typically manage client investment portfolios and handle tasks such as investment selection, asset allocation, rebalancing, and administrative functions. They tend to take a holistic view of a client’s situation and often work in conjunction with CPAs, attorneys, and estate planners to coordinate comprehensive financial planning.
Investment advisors are “Registered Investment Advisors” (RIAs), meaning they are advisors or firms engaged in the investment advisory business and are registered with either the Securities and Exchange Commission (SEC) or state securities authorities. Smaller firms and individuals typically register with state authorities, while larger firms managing more substantial assets register with the SEC.
Investment advisors are required to hold a Series 65 license, which allows them to function as an “Investment Adviser Representative.” This is NOT a license to sell investment products—it’s specifically for providing investment advice.
According to recent SEC data, the number of SEC-registered investment advisers has increased from approximately 12,000 in 2017 to more than 15,000 in 2025, with combined assets exceeding $128 trillion. The RIA model has become increasingly popular as investors have sought fee-only, fiduciary advice. Additionally, many former broker-dealers have transitioned to the RIA model, recognizing that consumers increasingly demand fiduciary standards and transparency.
Investment brokers (broker-dealers)
Like investment advisors, investment broker-dealers (commonly called “stockbrokers” or just “brokers”) help individuals plan and make important investment decisions. Investment brokers purchase investment products on behalf of their clients, so they tend to be more “transaction-oriented” than relationship-oriented, though this varies significantly by firm and individual.
Brokers typically hold a Series 63 license, in addition to either a Series 6 or a Series 7 license, to sell securities. The Series 7 is more comprehensive and allows brokers to sell a wider range of investment products.
Historically, brokers were bound by a “suitability” obligation—meaning they had to make recommendations consistent with their clients’ best interests but not necessarily above their own interests. This created potential conflicts of interest, particularly when brokers earned higher commissions on certain products.
The regulatory landscape changed significantly in June 2020 when the SEC’s Regulation Best Interest took full effect. Reg BI requires broker-dealers to act in the best interests of retail customers when making recommendations, a higher standard than the previous suitability rule, though still not the full fiduciary standard that RIAs follow.
Additionally, the Department of Labor’s fiduciary rule (which I mentioned in the 2017 version as taking effect in 2019) has had a complicated history. Various versions have been proposed, challenged in court, and modified. As of 2025, retirement account advice is subject to stricter standards than in 2017, though the specific requirements continue to evolve through regulatory action and court decisions.
The practical effect is that the distinction between brokers and RIAs has narrowed somewhat, though it hasn’t disappeared entirely. Brokers now face higher standards than before, but RIAs still maintain the strictest fiduciary duty.
If a broker calls himself a “Wealth Manager,” “Investment Advisor,” or “Financial Advisor” and does not accept the fiduciary duty of an RIA as described in the Securities Act of 1940, he’s potentially misrepresenting his role—though Reg BI has made these titles less misleading than they were in 2017.
The profession
Financial advisors come from diverse backgrounds. Many have been in sales. Banks, brokerage firms, mutual fund companies, or insurance companies may employ them. Advisors may work independently or as “contractors” for one of those companies.
The requirements to become a financial advisor remain relatively accessible—passing licensing exams (Series 63, 65, or 66) with no academic or experience prerequisites for entry-level positions. However, the best advisors typically pursue additional credentials, such as the CFP (Certified Financial Planner) designation, which requires substantial education, experience, and ongoing continuing education.
The job remains demanding, primarily due to the pressure to acquire new clients and, for commission-based advisors, meet sales targets. Turnover rates remain high, especially for those just starting out. Compensation can range widely—from struggling newcomers earning less than $50,000 annually to established advisors and planners earning well into six figures.
According to the U.S. Bureau of Labor Statistics, employment of personal financial advisors is projected to grow 17% from 2020 to 2030, which is much faster than the average for all occupations. As of 2025, there are approximately 330,000 personal financial advisors in the United States, up from about 275,000 in 2017.
However, the industry is undergoing significant shifts. The traditional model of individual advisors working for wirehouses (major brokerage firms) has declined somewhat, while the RIA model and robo-advisor platforms have grown substantially. Fee compression has been significant—the average advisory fee has declined from around 1% in 2017 to closer to 0.85-0.90% in 2025 for comparable services, driven partly by robo-advisor competition and increased transparency.
Financial planners versus advisors
The terms “financial planner” and “financial advisor” are often used synonymously, but there’s an important distinction. A financial planner is a financial advisor who creates comprehensive financial plans and provides investment advice.
Financial planners take a comprehensive view of a client’s finances and plan for all major areas: college funding, retirement planning, insurance analysis, estate planning, tax strategies, and more. They coordinate all these elements into an integrated plan rather than focusing solely on investment management.
In addition to the requisite licenses, many planners carry the “Certified Financial Planner” (CFP) designation, which is a high professional certification standard requiring extensive study (equivalent to a bachelor’s degree in financial planning), a comprehensive exam, relevant work experience (typically 6,000 hours or about three years), and ongoing continuing education.
The CFP Board reports that as of 2025, there are approximately 95,000 CFP professionals in the United States, up from about 82,000 in 2017. The CFP designation has become increasingly recognized as the gold standard for comprehensive financial planning, and many consumers now specifically seek CFP professionals when hiring advisors.
The rigor of CFP certification also means these professionals typically command higher fees than non-credentialed advisors. Still, the comprehensive planning they provide often justifies the cost, particularly for complex situations.
CFPs may be self-employed, work for small independent firms, or work within large financial institutions such as banks or brokerages. The setting matters less than the actual fiduciary commitment and quality of advice provided.
Context is important
Although financial advisors provide similar services, they do so in a variety of settings. That context significantly impacts how they deliver their services, the conflicts of interest they face, and how they’re compensated. Here’s an overview of the main settings:
Bank financial advisors
These advisors are employed by a bank and typically receive a salary plus commission or bonus incentives to steer you toward bank products and services. For example, if you have a cash balance of several thousand dollars or more in your account, a teller or personal banker might mention it and suggest you speak with the bank’s financial advisor.
They’ll also reach out if you indicate you want to set up or roll over an IRA, or if you deposit a large sum. In those cases, you’ll typically be directed to an advisor in the bank’s brokerage or wealth management division.
If you go that route, depending on the size of your account, you may work with someone with limited training on portfolio management strategies who will primarily recommend mutual funds offered by the bank or a select group of fund companies with which the bank has relationships.
In most cases, bank advisors are actually employed by the bank’s affiliated broker-dealer—for example, Wells Fargo Advisors (part of Wells Fargo), Merrill Lynch (owned by Bank of America), or J.P. Morgan Securities (part of JPMorgan Chase). You would also have access to financial planners through these firms.
The bank advisory space has consolidated significantly since 2017. Several major banks have sold their advisory divisions or significantly restructured them. Wells Fargo, for example, has gone through substantial changes following various scandals, and the entire bank-advisor model has come under increased scrutiny.
Additionally, many banks have shifted toward robo-advisory platforms for smaller account holders (typically under $250,000) while reserving human advisors for wealthier clients. This has created a two-tier system that didn’t exist as prominently in 2017.
Mutual fund company representatives
These are advisors who work for a particular mutual fund company (e.g., Fidelity, Vanguard, T. Rowe Price, Schwab). In this case, you may be choosing a company to work with rather than a specific advisor—they may simply assign someone to you based on the size of your portfolio.
Like bank advisors, mutual fund company advisors will be incentivized to recommend their own company’s products, though the major companies (Fidelity, Vanguard, Schwab) now also offer access to thousands of third-party funds.
Most of these companies’ products and services are of excellent quality, but that doesn’t guarantee that any particular advisor will be outstanding. You’ll need to do your due diligence before deciding to work with one.
Vanguard made significant changes to its advisory services from 2020 to 2023. The company shifted most clients with under $5 million in assets to a digital-first advisory model with limited human interaction, reserving dedicated human advisors primarily for their wealthiest clients. This reflected broader industry trends toward automation and fee pressure.
Fidelity and Schwab have taken somewhat different approaches, maintaining more accessible human advisor options even for smaller accounts, though they’ve also significantly expanded their robo-advisory offerings.
Brokerage advisors
These advisors provide essentially the same products and services as those offered by banks and mutual fund companies. The major difference is that they’re typically not tied to a particular product set and can recommend a wider range of investments.
Most brokerage firms offer both online self-directed brokerage accounts (for DIY investors) and personal advisory and portfolio management services. The distinction between these models has become increasingly blurred.
Some examples are companies like Schwab, Fidelity, and Vanguard (the “big three”), which are part brokerage/part mutual fund companies. Some also offer banking services and insurance products, making them essentially full-service financial institutions.
Others, like Morgan Stanley, Merrill Lynch, and Edward Jones, are “full-service” brokers that focus primarily on advisory services rather than DIY platforms.
Finally, discount brokers like TD Ameritrade (now merged with Schwab), E-Trade (now owned by Morgan Stanley), and newer players like Robinhood primarily offer online trading platforms and tools, though most now also offer some form of advisory option.
- The brokerage industry has undergone massive consolidation since 2017:
- TD Ameritrade was acquired by Schwab (completed in 2020)
- E-Trade was acquired by Morgan Stanley (2020)
- Larger players absorbed many smaller brokerages
Additionally, zero-commission trading became the industry standard in 2019, eliminating the trading fees that were common in 2017. This has made DIY investing more accessible but has also changed how brokerages make money (now relying more on payment for order flow, cash balances, and advisory fees).
Insurance company advisors
Advisors working for insurance companies provide advice and sell investment products, typically in addition to offering life insurance, annuities, and other insurance-based financial products. Almost all large insurance companies (MetLife, Northwestern Mutual, MassMutual, State Farm, New York Life, USAA) offer these comprehensive services.
Your friendly life insurance agent no longer sells only term, whole, or universal life policies—they often also offer mutual funds, annuities, and other investment products. In many cases, they’re selling mutual funds managed by the insurance company itself.
For example, Northwestern Mutual provides a full array of financial planning services and sells stocks, bonds, mutual funds, and CDs, in addition to its core insurance and annuity products.
Although these companies have expanded their offerings significantly, their main focus typically remains life insurance and various annuity products, including variable and indexed annuities that may use the company’s mutual funds as underlying investments.
Independent advisors (RIAs)
These are advisors who have “gone independent,” though they’re always affiliated with a custodian or broker-dealer for back-office support. They’re typically affiliated with a mutual fund/brokerage company (like Fidelity, Schwab, or Pershing) or a broker-dealer (like LPL Financial, Raymond James, or Commonwealth Financial) to handle custodial accounts, transactions, regulatory reporting, client statements, and compliance.
Independent RIAs are typically fee-only, adhere strictly to the fiduciary standard, and have greater flexibility in product selection than advisors at banks or insurance companies.
The independent RIA model has exploded in popularity since 2017. Many experienced advisors have left wirehouses and insurance companies to start their own RIAs, attracted by:
- Greater independence and flexibility
- Ability to act as true fiduciaries without product conflicts
- More favorable economics (keeping a larger share of fees)
- Better technology platforms from custodians like Schwab, Fidelity, and TD Ameritrade (now Schwab)
Industry data shows that RIAs now manage more assets than wirehouses for the first time in history, a significant shift from the traditional model that dominated for decades.
Robo-advisors
A robo-advisor is an online automated portfolio management service that uses computer-based algorithms to choose the optimal mix of investments for you based on your age, risk tolerance, time horizon, and other factors you input.
They’re typically a fraction of the cost of human advisors precisely because there are no humans directly involved in portfolio management—though most robo-advisors now offer some level of human support for questions.
The lower cost translates into better net returns for investors. They’re worth considering if you want a hands-off, automated service and don’t have a complicated situation requiring a direct relationship with a human financial advisor.
Robo-advisors are particularly popular with younger investors who grew up online. Still, they’ve also gained significant traction with retirees, particularly those drawn to passive index investing using low-cost instruments.
The robo-advisor industry has matured dramatically since 2017:
Major players have emerged: Wealthfront, Betterment, and various offerings from Schwab, Fidelity, and Vanguard now manage hundreds of billions in combined assets. Vanguard’s Personal Advisor Services (a hybrid robo/human model) alone manages over $250 billion.
Fees have compressed: Most pure robo-advisors now charge 0.25% or less annually, with some like Schwab’s Intelligent Portfolios charging no advisory fee (making money on cash allocations instead). WiseBanyan, which I mentioned in 2017 as “free,” has since been acquired.
Hybrid models dominate: The most successful robo-advisors now offer access to human advisors for additional fees, recognizing that pure automation doesn’t serve all client needs, particularly during market crises or major life transitions.
Tax-loss harvesting: Most robo-advisors now offer sophisticated tax-loss harvesting as a standard feature, something that was cutting-edge in 2017 but is now table stakes.
Retirement focus: Many robo-advisors have expanded beyond simple portfolio management to offer retirement planning tools, Social Security optimization analysis, and comprehensive financial planning—blurring the lines between robo-advisors and traditional advisory firms.
Financial coaches versus advisors
You may not hear the term “financial coach” as often as “financial advisor,” but it represents a different and valuable service. Other terms, such as financial life coach, money coach, and certified financial coach, are used somewhat interchangeably.
The main goals of a financial coach are to educate, partner with, guide, support, and hold clients accountable as they pursue their financial goals. Financial coaches focus on behavior change and foundational money management rather than investment management.
Financial coaches are not investment advisors. Whereas a financial advisor helps you manage the money you’ve already saved by using certain financial products and strategies, a financial coach focuses more on the basics—helping you gain the knowledge, skills, and behaviors to save money in the first place, eliminate debt, create sustainable budgets, and develop healthy financial habits.
Coaches can help you decide how and where to invest, especially if you want to manage your investments yourself through education and support, but they typically don’t give specific investment advice or manage portfolios. A financial coach focuses on education, attitudes, and behaviors—giving you the tools you need to steward your resources well.
Financial coaches come from diverse backgrounds. They may or may not have backgrounds in financial services. Some have extensive experience in other areas. Some are professional life coaches who specialize in financial coaching.
The most widely recognized credentials for professional coaches come from the International Coach Federation (ICF). Several ICF-accredited training programs offer financial coaching as a specialty.
Other programs include the Certified Financial Fitness Coach and Accredited Financial Counselor (AFC) designation, available through the Association for Financial Counseling and Planning Education (AFCPE). There’s also Dave Ramsey’s Financial Coach Master Training for people who want to help others apply principles taught in Financial Peace University.
Financial coaching has grown significantly as a profession since 2017, driven partly by:
- Increased recognition of behavioral finance principles
- Growing student debt crisis creating demand for debt coaching
- More people seeking help with financial basics rather than investment management
- Rise of fee-only financial coaching as alternative to commission-based advice
Financial coaches are still less common than traditional advisors and are typically self-employed or work for nonprofits. However, some financial advisory firms now employ financial coaches, recognizing the value they provide, particularly for younger clients or those rebuilding after financial setbacks.
Full disclosure: I am NOT a Financial Advisor. I am a Financial Coach, having received both ICF-accredited training through CoachU and Financial Coach Master Training from Ramsey Solutions. However, most of what I’ve learned about personal finance and retirement stewardship has come through decades of independent study, life experience, and working with many people over the years—including eight years of managing my own retirement.
They’re everywhere
As you can see, financial advisors are embedded in all kinds of financial services companies, and they’re not all the same. The setting matters. The compensation structure matters. The credentials matter. The fiduciary commitment matters.
In the next article, I’ll discuss in detail how financial advisors are compensated and what that means to you and your investments—an essential topic for anyone considering working with an advisor.
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