“To acccept good advice is but to increase one’s own ability.”

-Johann Wolfgang von Goethe

The best way to choose an advisor is to understand what type of investment assistance best fits you.   If you find that monitoring your investment choices is not interesting to you or you don’t have the time to do it justice, then you should turn to an expert.  Besides knowing what you want an advisor to do for you, you should clearly understand how that advisor is compensated.

Although there are different configurations of advisors, they basically break down into three groups.  These groups are:

• Brokers
• Financial Planners
• Investment Advisors

Brokers are able to execute buy and sell transactions on behalf of their clients.  There are wirehouse brokers, such as Merrill Lynch or Morgan Stanley, who can provide a range of information about a multitude of investments.   Brokers are normally compensated by a sales commission generated by whatever product they are buying or selling for you.  Discount brokers, as the name implies, will execute your decisions for a lower sales commission. However they provide less research as they need to maintain lower overhead costs. Brokers are regulated by the Securities and Exchange Commission (SEC) and state regulators.  They are registered with the Financial Industry Regulatory Authority (FINRA.)  The FINRA website  contains additional background information on all brokers.

Financial planners can be either investment advisors or brokers.  This designation is based on what services they provide and how they are compensated for those services.  Many financial planners charge an hourly fee and provide a comprehensive overview of your financial situation.  They help to establish appropriate financial goals incorporating a broad approach that includes retirement planning, college savings plans, estate planning and insurance needs.  If the financial planner just collects a fee for generating your plan or a management fee for actually overseeing your investments, they are licensed as investment advisors, regulated by the SEC or the state securities departments.  If their compensation is based on commissions from selling you investment products, then they are regulated as a broker.

An investment advisor is licensed and regulated either by the SEC or the state securities departments.  Investment advisors are given authority to make investment decisions on the client’s behalf.  They provide on-going management for a portfolio of assets.  Investment advisors are usually compensated by a management fee based on the assets they are overseeing on your behalf.  Investment advisors are obligated to put your interests, as the client, ahead of their own.  In other words, they must serve as a fiduciary on your behalf. Brokers do not have this requirement.

To get further background on individual brokers and investment advisors, review information on website at the SEC and FINRA.

Holt-Smith Advisors is a registered investment advisor with the SEC.  We provide on-going portfolio management services, including the day-to-day decision making and implementation to respond to market conditions within our clients’ guidelines.   We assist our clients with other financial issues as appropriate.  We earn a management fee that is a percentage of the assets we oversee.   We do not sell products nor do we charge commissions.  Our business does better only when our clients are happy and do better too.