posted by: Radnor Financial Advisors
At a high level, ‘financial services’ is a pretty broad term that boils down to a variety of businesses that all have something to do with money management. In a space full of complicated jargon and shifting landscapes, it can be confusing to decipher who does what. We’ll highlight five main types of financial services:
Registered Investment Advisors provide independent financial advice and ongoing asset management services. As advice-oriented fiduciaries, they are held to the highest ethical standards within the industry such that they are obligated to always act within their clients’ best interests. With a fee structure based on management fees instead of commissions, RIAs will unconditionally operate in good faith to make the best decisions for each client, rather than promoting financially-motivated transactions that would benefit the RIA’s own bottom line. Typically geared toward offering more holistic wealth management, RIAs are relationship-focused and ensure transparency while imparting trusted financial advice. Freed from specific company- or product-affiliations, RIAs can appropriately customize portfolios based on their clients’ individualized goals and needs.
Broker-dealers are what one might typically have in mind when they think of traditional Wall Street organizations. Broker-dealers buy and sell investment products such as mutual funds, stocks, and hedge funds for commission. These brokerage firms primarily facilitate transactions, both executing orders on behalf of others, and performing trades for their own account. They are sales-oriented institutions that act as a linchpin in the financial markets, establishing the foundation to facilitate securities trades on the exchanges. Any investment advice tends to be incidental at the point-of-sale, without taking into account clients’ overall needs and best interests.
Banks refer to traditional retail and commercial banking institutions that offer deposit accounts, custody, and lending services, but are limited in the way of financial advice. Banks often partner with a third-party broker-dealer in order to sell their investment products—sometimes to the detriment of the customer/client, given the one-size-fits-all model and lack of personalized attention.
CPA firms mainly concentrate on preparing and filing tax returns at the federal, state, and local levels during tax season, in addition to planning and minimizing tax obligation in connection with financial decisions throughout the year. In the event of an audit, they provide representation before tax authorities to handle tax matters on your behalf. Some CPA firms also offer services that include management and oversight activities such as financial planning, investment advice, and estate planning.
Insurance companies sell insurance contracts to their customers to provide peace of mind should an unforeseen disaster ever occur. There are numerous types of insurance products available that may cater to different types of customers—life, auto, health, disability, homeowner/renter, etc. Individuals and businesses rely on insurance companies to mitigate the risk of financial loss in the event of personal or property misfortune. Insurance companies can team up with broker-dealers or banks in a mutually beneficial partnership that aims to provide financial security through a product offering that includes both protection and investments.
So where does Radnor Financial Advisors fit into the financial services mix? Radnor falls into the first bucket described above, as an independent RIA firm. This means Radnor does not sell any products or receive any commissions. We are held to the highest ethical standards, ensuring that our recommendations are based solely on what is in the best interest for our clients. By providing comprehensive financial planning services, we remain flexible without pushing a particular bank or insurance company’s products for commission. In maintaining a big-picture plan grounded in deep insights and a detail-oriented level of service, we act as the quarterback for all of our clients’ financial needs.