The terms financial advisor and broker may seem interchangeable to some investors. Both financial advisors and brokers are financial professionals. The main differences lie in the types of services offered and in the way they are compensated by their clients. 

What is a Broker? 

A broker is an individual or firm that acts as an intermediary between their clients and one or more security exchanges. The broker buys and sells stocks and other securities on behalf of their clients on these exchanges. 

Brokers and brokerage firms are typically affiliated with a broker-dealer. Brokers are typically compensated through transaction fees such as commissions earned for facilitating trades for clients. 

While the term broker typically conjures an image of a person, brokers can also take the form of online brokers. Investors can submit their trades and the online broker will execute them within their account. Some of these online brokers may be discount brokers who offer low or in some cases no transaction fees. 

The more traditional full-service broker often works at a full-service brokerage firm. These brokers were often referred to as stockbrokers in the past. 

If you have a 401(k) or employer retirement plan, it's highly likely that you are using a broker to facilitate your investments.

What is a Financial Advisor? 

A financial advisor provides their clients with financial advice in a variety of financial areas including investments, retirement, estate planning, and other aspects of the financial planning process. Financial advisors or advisory firms will generally be registered Federally with the SEC (Securities and Exchange Commission) or at the State level. Registered advisors are required to pass the Series 65 exam administered by the NASAA (North American Security Administrators Association) or one or more of several other exams. 

Many financial advisors operate on a fee-only basis, meaning that they are compensated for the services and advice they provide and not for selling financial products. 

Most Financial Advisors offer a wider offering of services when compared to traditional brokers. Some of these services include:

Many financial advisors have also earned the Certified Financial Planner (CFP) designation. The CFP has a number of requirements, including:

The CFP is considered to be the gold standard of professional designations for financial advisors. 


This aspect can be very confusing for investors looking for the right type of financial professional for their needs. 

Brokers are generally compensated by sales commissions or sales charges, called loads, from the sale of various financial products. This might include stocks, bonds, mutual funds, ETFs, and other types of securities. Additionally, they will also receive compensation from the sale of annuities and life insurance if applicable. 

Many financial advisors adhere to a fee-only model. This means that the client pays the advisor for the advice they provide. There are a number of variations of this model, including: 

When discussing compensation with a financial professional you are considering working with, or one with whom you have an existing relationship, ask questions about ALL ways in which they are compensated for working with you. Be sure to fully understand the broker or advisor’s compensation structure and any potential conflicts of interest this can lead to. 

Are they a Fiduciary? 

Financial advisors who are registered with the Securities and Exchange Commission, in many States, and those who are CFPs are held to a fiduciary standard. This means that they must put the interests of their clients first. 

Brokers and others who work through broker-dealers are generally held to lower standards in terms of their duty to their clients. The suitability standard states that advice and product recommendations must be suitable for someone in the client’s approximate situation, but not necessarily for the client’s specific, exact situation. 

The regulatory situation is evolving in terms of the duty of care that both financial advisors and brokers must adhere to. Again, be sure to ask any advisor or financial professional that you are considering working with if they are a fiduciary and if they will put this in writing. If they refuse, this again is a red flag. 

Canty Financial is a fee-only registered advisor who works with clients as a fiduciary. We are transparent about fees and all aspects of our dealing with clients. We encourage client questions and will always provide full disclosure as to our fees, our compensation, and why we are recommending a particular investment or course of action.

Please feel free to reach out to us if you have any questions about your investment accounts, taxes, or financial planning. We are here to help.

Bill Canty, CFP®, CPA

Ed Canty, CFP®, Investment Advisor

Joe Canty, Investment Advisor

Maureen Walsh, EA, Tax Advisor

Tina Alteri, CPA, Tax Advisor

The financial services industry has a bad habit of using terms that can seem vague and confusing to clients. There is probably no place where this confusion is greater than how an advisor is compensated. Additionally, the term fiduciary is tossed around by the media quite a bit.

However many investors don’t fully understand what a fiduciary is and why it's important to work with a financial advisor who acts in a fiduciary role to their clients. 

How is my financial advisor compensated? 

While this sounds like a simple question with a straightforward answer, oftentimes it isn’t quite so simple. Let’s look at the three main ways in which a financial advisor might be compensated for working with you as a client. 

Commission-Based Advisors

Commissions represent payments for selling investment and insurance products to their clients. The commission is paid to the advisor’s firm by the insurance company or the investment company offering the product.

The level of commission on a financial product might be an incentive for the financial advisor to suggest that product to a client versus one that might be more appropriate for their needs. Commissions might also take the form of various trailing fees on mutual funds or other types of fees paid to the advisor over time. 

Fee-Based Advisors

Fee-based is perhaps the most confusing type of arrangement to many clients. Fee-based is often a combination of some sort of fee for a financial plan combined with the implementation of some or all of the planning recommendations via commission-based products.

Fee-based is often confused with fee-only which has gained increased popularity based on the publicity that fiduciary advisors have received in recent years. We suspect that this confusion may be intentional in some cases. 

Another take on the fee-based model is a push by many brokerage firms and broker-dealers in recent years to offer brokerage wrap accounts. These are managed accounts for which a management fee that is usually based on a percentage of assets is charged.

Additionally, the underlying investments are often mutual funds that offer compensation to the brokerage firm in the form of fees such as 12b-1 fees or similar fees. This aspect can make the underlying funds more expensive for the investors and more lucrative for the brokerage firm offering the wrap account. 

Fee-Only Advisors

Fee-only is largely what it sounds like. The financial advisor is compensated only from the fees charged to their client. There is no compensation from the providers of financial products.

Fee-only compensation might be an hourly arrangement, it might be a flat retainer fee, or it might be charged as a percentage of the client’s assets under advisement. Clients pay the advisor only for the advice they receive. At Canty Financial we are fee-only financial advisors.

How your financial advisor is paid is a critical question as it goes to whether or not their advice to you is based on suggestions and recommendations that are predicated solely on what is best for you as their client, versus whether their advice is influenced by the utilization of financial products that offer them the highest levels of compensation. 

Before hiring any financial advisor you should insist on knowing all forms of compensation that the advisor will receive from working with you.

If an advisor won’t readily disclose this information to you, this should raise a red flag and cause you to question whether this is the best advisor to work with.   

What is a fiduciary advisor? 

The term fiduciary applies to someone legally acting on behalf of another person or a group to manage their assets. An attorney, a trustee or a financial advisor can all be examples of someone acting in a fiduciary capacity. 

A financial advisor who acts in a fiduciary capacity pledges to put the interests of their clients first. This means that any recommendations made to their clients are made solely with the client’s best interests in mind. This includes any financial products that are recommended or any other suggestions they might make to you. 

People are often surprised that a financial advisor is not obligated to work in the best interests of their clients. For years the brokerage world worked on the suitability standard, this means that a recommendation for a financial product must be suitable for someone in a similar situation to their client but doesn’t necessarily have to be in their best interests. 

The recent enactment of Reg BI disclosures for broker-dealers establishes a standard of conduct for brokers in terms of recommending only those products that are in their client’s best interests and requiring disclosures of any conflicts of interest. This is a positive step but falls short of requiring these brokers act in a fiduciary capacity. 

A financial advisor does not have to use the fee-only compensation model to be a fiduciary, but it's pretty hard to see how an advisor who is compensated via commissions can truly act in a fiduciary capacity. 

If an advisor who you work with or with whom you are considering working says they act in a fiduciary capacity ask them to put this in writing. 

Importance of a fee-only advisor who is a fiduciary 

The combination of an advisor who is a fiduciary and who works on a fee-only basis is a powerful one. We are clearly biased, but we feel that this arrangement is generally best for a client.

In our opinion, financial advisors should be compensated for their advice and expertise, not for recommending one provider’s financial product over another.

We feel adamant that no client should ever be confused by how their financial advisor is compensated, nor should they ever have to question whether or not their financial advisor has their best interests in mind. 

If you are looking for a fee-only fiduciary financial advisor who will always put your interest first, please give us a call.

Bill Canty, CFP®, CPA

Ed Canty, CFP®

Joe Canty, Investment Advisor Rep.

Maureen Walsh, EA, Investment Advisor Rep.

Tina Alteri, CPA, Tax Advisor

The term “financial planning” is a common one that is often written about in the financial press. Many financial advisors list financial planning among the services that they offer to clients. We believe this is a critical part of the services that we provide our clients. 

But what is financial planning? We think its important for our clients and for anyone considering our services to understand what financial planning entails. 

The CFP Board defines financial planning as: 

“Financial Planning is a collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances.” 

We concur with this definition, especially that it is a collaborative process. Here are the key points in the process from our perspective. 

Defining Client Goals 

The financial planning process is about financial advisors devising strategies to help their clients achieve their various financial goals. A good financial advisor will ask their clients a lot of questions about their financial goals and then listen to the answers. Beyond any training or certifications that a financial advisor might have, their most important skill is the ability to listen. 

Client goals may include saving for retirement, managing their income in retirement, saving for college, a new home or a host of others. Advisors should ask about a client’s goals regarding providing for dependents or family members via estate planning.   

Client goals and priorities will vary among clients based on their age, family situation and a host of other factors. 

Gather Client Data 

A key part of the process is for the financial advisor to gather data from their client to use in their analysis of the client’s situation. Much of the data gathering concerns gathering formation about the client’s assets and liabilities. This includes retirement accounts, investments, a pension, ownership of business, stock-based compensation, real estate and a host of other types of assets. On the liability side your advisor should ask about any mortgages, business indebtedness, student loans and other liabilities you may have to others.   

They should ask about any estate planning documents that are in place as well as any life, disability or long-term care insurance that is in place. Ensuring that all beneficiary designations on insurance policies and retirement accounts are up-to-date is a critical issue that can be dealt with here. Many financial advisors will ask for recent tax returns as well as there is a wealth of information there, and the return may raise some additional questions from the advisor. 

Data gathering goes beyond financial information, the data gathering process should include details of the client’s family as well. 

Develop the Initial Plan 

Once the financial advisor has gathered the relevant financial and personal data, and they are comfortable that they understand their client’s financial goals and risk tolerance it's time to develop the initial financial plan. This will include the advisor’s recommendations in areas like retirement planning, an investing strategy, estate planning, tax planning and other relevant areas. In the case of a business owner client it will likely include strategies around business exit planning if applicable. 

Review and Revise 

Once your financial advisor has completed the initial version of the financial plan they should share this document with you to allow you time to review it. Once you’ve had a chance to review the plan the next step is generally a meeting with the advisor to review it together

This review process is a good time to be sure you understand what the advisor is recommending as next steps. It is also a time to ask questions. It's important that you feel comfortable with the plan and the implementation steps that the advisor is suggesting. In some cases a look at the initial draft of the plan might cause the client to review their own goals and make some changes if needed. 

This is all positive and any good financial advisor is glad to revise their plan based on their client’s input. The whole point of the financial planning process is to help clients visualize their financial goals and to buy into a strategy to achieve their goals. 

Update and Repeat

Perhaps the most important part of the financial planning process is the realization that this is not a one-time thing. If you are working with a financial advisor on an ongoing basis, part of the periodic reviews they conduct with clients should include reviewing all or part of the financial plan to determine if things are on track. 

In addition to determining if a client is on track towards a goal like retirement, the review process will help the advisor understand any changes in the client’s circumstances, or perhaps in their financial goals. 

Life isn’t static and neither is the financial planning process. For example, if your investments have performed better than expected, the advisor might adjust your asset allocation to reduce risk a bit to help preserve your investment gains. 

Clients change their plans as well. If a client decides to retire early, either voluntarily or due to a layoff, this will have an impact on their financial plan and will likely call for some adjustments. The death of a spouse, a divorce or leaving a job to start a business are all life situations that will likely call for adjustments to your financial plan. 

Communication is Key 

One way to judge if you are working with the right financial advisor is the frequency and quality of their communications with you. Updates in the form of reports or newsletters are great. Beyond this, a key issue to consider is whether or not your advisor asks questions on a regular basis. 

This should start with your initial meeting with them and through the process of developing the initial financial plan. But the process of asking questions and listening to the answers is something that a good financial advisor will do throughout their relationship with you. 

This might be the most important part of the financial planning process. Asking questions and getting clients to discuss issues of importance to them is the best tool that an advisor has to help them in determining if changes to a client’s financial plan are needed. 

If you are looking for a fee-only, fiduciary advisor to help you develop a financial planning strategy now and through the years, please give us a call to discuss your situation and see how we can help you.

Bill Canty, CFP®, CPA

Maureen Walsh, EA, Investment Advisor

Ed Canty, CFP®Investment Advisor

Joe Canty, Investment Advisor

Tina Alteri, CPA, Tax Advisor

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