As you look for a guide through the ever-changing financial landscape, you may come across a few terms that might need some clarification. In particular, we’ve often found that there is some confusion about the distinctions between brokerage firms and investment advisor firms, which we prefer to call client firms.
Though these two options can seem similar, there are significant differences between them. In fact, they largely serve two substantially different roles when it comes to providing financial services for their clients.
In this post, we will spotlight the differences between brokerage firms and client firms, before diving into what makes our approach at FourStar Wealth Advisors so unique.
What Is a Brokerage Firm?
Brokerage firms are a more “old school” model for those attempting to secure their investments and manage their wealth.
If it helps, you might think of a brokerage as a specialized boutique or store, selling products from only one brand or manufacturer.
We could use the metaphor of a manufacturer-backed auto dealer, for instance. In this case, you may go to the dealership and look for a car that meets your needs. But if this dealer doesn’t have what you need on the lot, they will try to sell you a different vehicle instead.
In essence, brokers are focused on selling investments for commission. Or, put another way, their main goal is moving inventory. This is how they get paid.
For another perspective, Investopedia reminds readers that brokers may also “be involved heavily as part of a sales team in private placements, initial public offerings (IPOs), or secondary issuances.”
It goes on:
“Working alongside their firm’s corporate finance departments, brokers may work to sell their clients on a hot new issuance or private deal in order help a company raise capital. In return, the broker may receive a commission, shares, or warrants in the issuing company.”
What Is a Client Firm?
So, if a brokerage is more like a manufacturer-backed auto dealer, you could think of a client firm as more like an auto mall. Rather than being limited to just one type of product, these lots carry many different types of vehicles, from various brands. Here, the job of an advisor is to understand your needs, take you around, and find the perfect vehicle for you
Similarly, in a client firm, advisors can help ensure that you always get the best solution for your individual financial wants and needs. They are not beholden to any one investment product or financial path.
A Forbes writer explains the role of a wealth manager at a client firm this way:
“[Their job] is to do what you would do if you had their time and expertise. First, they get to know you. Then they service your requests. And lastly they learn to anticipate your needs.”
FourStar Wealth Advisors is a client firm, not a brokerage.
The Benefits of a Client Firm
As a client firm, we take the good parts of the old school, and bring them into the future with a laser-focused approach for our clients.
After taking the time to truly understand our clients’ financial goals, we survey the entire landscape for the right idea to suit their needs. We work with all major investment companies, fund families and investment banks, and are not captive to any one firm.
This creates a healthy level of competition for your investment business, which ultimately benefits you. At the same time, we are able to cherry-pick the solutions that make the most sense for your one-of-a-kind financial goals. We don’t just sell or manage investments, but are able to help you understand your entire wealth management framework at every level. This may include not only portfolio management, but also tax, mortgage, retirement, and estate planning,
Finally, our advisors are not paid to sell, but profit only from advisory fees paid by clients to help them achieve their financial goals. Client firms are held to a high standard for impartiality, and are bound by the law to best serve the needs of their clients, free from any conflicts of interest.
For more insight, feel free to take a look at this explainer video, which highlights how FourStar Wealth Advisors differs from other firms:
About FourStar Wealth Advisors
FourStar Wealth Advisors is a Registered Investment Advisor firm headquartered in Chicago. FourStar Wealth is an independent firm, without the conflicts or restrictions of the old school brokerage firms. Our goal – and our sacred pledge – is to help folks and families articulate their wants, needs, and desires, in order to live a full and complete life.
We believe that money and wealth are tools to help investors get where they are going and achieve their hopes and dreams, by achieving their financial goals.
Whether you are accumulating wealth or investing for income, solidifying your retirement plan, or devising a distribution approach that meets your lifestyle and legacy goals, we will help you define what is most important to you and then formulate the strategies that are suited for your needs, using our unique “Build-Live-Share” approach.