Table of Contents
There are 3 kinds of financial advisors/planners:
- Insurance-licensed advisors
- Securities-licensed advisors
- Insurance- AND securities-licensed advisors
Insurance-Licensed Advisors
Insurance-licensed advisors sell life and long-term care insurance policies, as well as annuities.
They are regulated by the State Department of Insurance.
There are two kinds of insurance licenses available for agents:
- Captive insurance license (can only sell products offered by their employer).
- Independent insurance license (sometimes called brokers, can sell products from any company).
Securities-Licensed Advisors
There are two kinds of securities-licensed advisors:
- Commission-based advisors
- Fee-based advisors
Commission-Based Securities-Licensed Advisors
A commission-based, securities-licensed advisor earns income by charging a commission for investments. Commission rates may be reduced for large purchases.
They sell commission-based mutual funds and investments and are allowed to sell commission-based variable annuities IF they hold an insurance license as well.
Commission-based advisors are regulated by the State Department of Insurance.
NOTE: Commission-based securities-licensed advisors may not charge a fee for any services rendered. They may only be compensated by commission.
Fee-Based Securities-Licensed Advisors
A fee-based, securities-licensed advisor earns income by following the fee-for-service model. Fees may include services rendered for financial planning and/or investment management.
They can sell fee-based investments such as stocks, bonds, mutual funds, exchange-traded funds, and more. They can also sell fee-based variable annuities IF they hold an insurance license as well. How are fees determined? The fee charged, which is generally non-negotiable, is a percentage of the total assets you have invested with that firm. The fee rate is set by the firm, not the advisor.
Chapter 2: Regulations
