About Advisors: Types of Firms

Types of Financial Service Firms

Just about everybody seems to be in the financial services business: RIAs, Planning Firms, Broker/Dealers, Banks, Insurance Companies, and CPA Firms. Even your car insurance agent wants to sell you mutual funds. You have plenty of choices, but which choice is best for you?

Several years ago more than 60% of investors selected brand name firms because they thought they were safer. After years of headlines that documented one abuse after another, this number has declined to less than 20%.

There is one pivotal question you should ask yourself. Did these firms get into the financial service business for the right reason? 

Registered Investment Advisors (RIAs)

RIAs are firms that provide financial advice and ongoing services for fees. They are  financial fiduciaries who are held to the highest ethical standards in the financial service industry. Paladin believes you should select an RIA firm or an IAR to be your financial advisor.

Planning Firms

Planning firms may be RIAs when they provide financial advice and services for fees. Or, they may be broker/dealers, if they provide planning for commissions. But, whereas an RIA's primary business may be investment, a planning firm's primary business is providing various types of plans: Financial, Retirement, Estate, Charitable, etc. 


These firms primary business is selling investment products (mutual funds, hedge funds) for commission. This is their distinguishing characteristic. They also buy and sell securities for their clients. They charge transaction fees to process the trades and pay commissions to advisors.


Bank of America purchased Merrill Lynch. Merrill Lynch is an RIA and a broker/dealer. BofA has more services it can sell to its bank customers. Merrill Lynch can sell traditional bank services to its clients. This is a win-win for BofA and Merrill. Is it a win-win for clients?

Insurance Companies

Insurance companies have the same game plan as banks. They buy broker/dealers and RIAs so they can sell additional services to their insurance customers. At the same time, the sales reps (broker/dealers) and investment advisor representatives (RIAs) can sell insurance company products to their clients. Like the banks, they want to generate as many revenue streams as possible from their clients. Is this in their clients' best interests?

CPA Firms

According to the AICPA more than 40% of CPA firms offer some form of financial advice or service: Planning, investment, insurance. The actual combination of services varies by CPA firm. Some firms have employees who provide these services. Other firms are affiliated with financial service firms who provide financial advice and services.

Paladin says.....

Which type of service provider should you select? it gets down to expertise. Does a bank employee have the same knowledge as an independent RIA. Remember, the banks' motive is to generate more revenue streams per client and not deliver top quality serivces that may be less profitable. 


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