Is it best to work with an independent advisor or part of a large company? I am not savvy with investments and am retired. You need to make sure you hire someone or a company that can help you and probably has some insurance coverage.
-Sharon
Great question, Sharon. We provide some background that you may find helpful when searching for an advisor, whether they work for a large firm or a small independent practice. Although I’m independent (which I particularly like and my clients are), I don’t think one is inherently better than the other.
It’s more about the company’s culture, the individual advisors, the services they offer, and your preferences as a client. You may end up feeling more comfortable using one than the other, and that’s perfectly fine. It’s your money, so you need to be happy with where you keep it. (If you need help finding a financial advisor, This tool will help you match. )
Is your company insured?
In particular, you brought up the topic of insurance. Given the way your question is phrased, I suspect it might be worth explaining how businesses can be insured. The two most common types of insurance you should know about are SIPC and E&O.
SIPC insurance
The Securities Investor Insurance Corporation (SIPC) provides the same type of insurance to securities companies as the FDIC provides to banks. SIPC insurance It protects you if your securities company goes bankrupt. In particular, it does not protect you against the risk of market loss.
SIPC typically covers accounts for both large and small independent businesses. This can be asked and easily verified.
Errors and omissions insurance
This is professional liability insurance. This protects the firm and advisors in the event that a mistake or omission on the part of the client harms the client and the client takes legal action against them. This will help ensure that they can actually pay you for any judgment that may arise.
Again, large and small businesses alike often carry E&O insurance, and there’s no harm in inquiring about it. (If you want to hire a financial advisor but don’t know where to start, Consider matching the one here. )
What is a custodian?
You may not know this, but most independent companies utilize the infrastructure of large institutions for their accounts and investments through custodial agreements.
In the investment world, a custodian is an institution that handles customer accounts and securities. Independent advisors who work with individuals rarely own (custody) client funds themselves, instead relying on established firms for back-end logistics. Some of them are famous people like Charles Schwab. fidelity or TD Ameritrade (Owned by Charles Schwab). You may have never heard of other companies, such as Altruist, SEI, and TradePMR, because they only serve independent advisors and do not have a retail arm for the public. (This tool helps match you with advisors who may meet your needs. )
How are companies regulated?
Businesses, large or small, are subject to regulatory oversight. The same goes for the individual advisors who work there. You can see the firm and its advisors. SEC website.
Investment advisory firms must register with the SEC or state regulators, depending on the funds they manage and other criteria.
What about the services they provide?
Check to see if the company offers the services you want. For example, you might want to manage everything from your mortgage, insurance, retirement savings, and bank accounts under one roof. This is less likely for smaller, independent companies, but some do.
Of course, the flip side is that you’re likely just a customer of a large company. If a closer relationship with your advisor is important to you, an independent is more likely to provide that. However, just because someone works for a large company doesn’t mean they won’t provide quality service with a personal touch. (A financial advisor We can help you with a variety of needs and services, including retirement planning, investment management, and estate planning. )
conclusion
Both large and small businesses have safeguards in place to protect their customers and their funds. Of course, that doesn’t mean the risk is zero. Always check with your advisor and their company and ask questions if you have any concerns. You need to understand where your money is kept and who controls it. Ultimately, the decision to work with an independent advisor or a large firm is often a matter of personal preference.
Tips for finding a financial advisor
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find financial advisor It doesn’t have to be difficult. SmartAsset Free Tools , we match you with up to three vetted financial advisors serving your area. You can also have a free introductory call with an advisor to determine which advisor might be a good fit for you. Are you ready to find an advisor to help you reach your financial goals? Get started now.
Brandon Renfro, CFP®, is a SmartAsset Financial Planning columnist and answers readers’ questions about personal finance and taxes. Have a question you’d like answered? Email AskAnAdvisor@smartasset.com. Your question may be answered in a future column.
Brandon is not a participant in the SmartAdvisor Match platform and receives compensation for this article.
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post Ask your advisor: Is it better to work with an independent advisor or an advisor from a large company? It first appeared SmartRead with SmartAsset.