Know Your Advisor

Anyone can hang out a shingle and call themselves a financial planner or financial advisor since there are no rules or regulations regarding that, but there are three basic types of “advisors.” The first is someone who holds an insurance license which allows them to sell life insurance and one investment only and that is a fixed/indexed annuity. With this type of license, an agent can’t discuss, analyze or sell risk products and therefore should not advise anyone to get rid of that type of product. If an agent has an insurance license and can only sell life insurance and one investment then are they truly a financial planner?

The second type of advisor has one or more securities licenses to be able to sell mutual funds, variable annuities, individual stocks and other risk products based on the actual licenses that they hold. Securities licenses allow agents to be paid commissions in various ways and they are permitted to sell and discuss risk products.

The third type of advisor is someone who has a Series 65 license which is called a fee based advisor. With this type of license, an agent can sell and discuss risk products and charge fees for their services instead of earning commissions. A fee based advisor is also considered a “fiduciary” which means by law they must act in the client’s best interest and disclose any conflicts of interest so some people say that you should only deal with an advisor who is a fiduciary.

In my opinion, if someone only has an insurance license then they are not a financial planner. With a fee based license only, there might be products that would be advantageous to the client, but not available for the advisor to sell. Therefore, an advisor with all three sets of licenses may be able to best meet the needs of a client depending on what they are trying to achieve.

Agents who have securities licenses are overseen by the Financial Industry Regulatory Authority and their website is There is an investors section that provides information on various topics and there is also a section called The BrokerCheck system allows you to enter the name of an advisor to see if they have a securities license and if they have a Series 65 license then there will be a link to the Securities and Exchange Commission website. If someone doesn’t show up at all in that system then they are probably a life insurance agent only.

The BrokerCheck system also provides information that an agent is required to report such as employment history, outside business activity and any derogatory information including lawsuits, complaints, liens or bankruptcies. This way, someone can research the advisor that they are working with to see if they might be changing employment often or if they have multiple complaints.