Consumer Connection: October is Financial Planning and Retirement Security Month

By Sonya Sellmeyer, Consumer Advocacy Officer for the Iowa Insurance Division

October is both financial planning and retirement security month. Creating a financial plan during your working years ensures a solid foundation for a secure retirement. Starting your financial journey may require the assistance of a financial professional.  Before working with a financial professional, consumers need to understand what services the professional is licensed to provide, how they are paid, and their ethical requirements.

What is the difference between an investment adviser, securities broker, robo-adviser, and an insurance agent?

Investment Adviser: An investment adviser counsels consumers on money matters by setting up a financial plan and recommending specific investments. They plan or advise on your current money situation and long-term goals. An adviser can be paid hourly, by a flat fee, or by a percentage of assets under management. An adviser is held to a fiduciary standard, meaning they must put your interest ahead of their own. They are regulated by the Securities and Exchange Commission (SEC) or the Iowa Insurance Division. You may also get additional information on an investment adviser’s past employment, disciplinary history, and any conflicts of interest they have from their form ADV. Double-check before you invest with an investment adviser or by calling the Iowa Insurance Division at 877-955-1212.

Securities Agent or Broker: A licensed broker recommends and sells stocks, bonds, and mutual funds. A broker will consider overall financial goals when making investment recommendations, but generally does not provide a detailed long-term plan. Brokers are paid on a commission basis on the investments sold, and are required to act in an investor’s best interest. A financial professional may be both an investment adviser and securities broker. Double-check before you invest with a broker or by calling the Iowa Insurance Division at 877-955-1212.

Robo-advisers: Another alternative to obtaining financial planning and investment services are robo-advisers.  After collecting financial information and goals, a robo-adviser offers a digital platform and provides automated, algorithm driven financial advice with little or no human interaction or supervision. The robo-adviser may also provide access to a support desk or to a licensed professional if you have questions. As with any financial professional or platform, ensure the recommendations are consistent with your investment goals and risk tolerance. Understand all fees being charged for recommendations and transactions. Robo-advisers must also be registered by the SEC or the Iowa Insurance Division. 

Insurance Agents: An insurance agent may sell various products such as life insurance and annuities, and is licensed by the Iowa Insurance Division.  When making a recommendation of an annuity, agents must act in the best interest of their clients.  Insurance agents may also be licensed as a broker or an investment adviser so as to advise you on your financial matters and sell you investments.

To eliminate confusion when dealing with any financial professional, understand what products and services they are licensed to sell, how they are paid, and the ethical requirements they must follow. Ensure you understand what you are buying, how it works with your financial plan, and double-check a financial professional’s licensing and disciplinary information with the Iowa Insurance Division or call 877-955-1212.