The Differences Between a Financial Advisor and a Broker

by | Oct 1, 2020

Although a financial advisor and a broker seem similar to an outsider, financial advisors and brokers perform vastly different roles in the financial services industry.

A broker is tied to one company resulting in a disadvantage to the client as the broker will only provide in house products and solutions which are often not in the interest of the client.

The role of the advisor is to assist a client to formulise a financial plan that covers the many life changes that the client will encounter during his/her working life until retirement and thereafter.  Their main objective is to help the client understand the objectives of the plan and ensure that these goals are met. While the Broker may sell individual products the Advisors function is to provide ongoing solutions tailored to suit the individual’s needs.

Michael Haldane of Global and Local Investment Advisors clearly sets out the differences between a financial advisor and a broker in his article below.

Some people use the terms “financial advisor” and “broker” interchangeably and most investors are under the impression that they are the same, but they are in fact vastly different.

It’s very important that you understand the difference between the two especially when putting your trust into an individual who will take charge of your financial needs and plan.

What is the main difference between a financial advisor and broker?


A broker is generally an individual that is a tied agent to one company. What this means is that they will be limited to only provide advice and investment products that are linked to that company only.

Financial advisor:

A financial advisor has a vast and more open-architecture platform where they can provide advice over several different investment companies that is in the best interest of the client. A financial advisor’s job is to be able to sit down with an individual, plan out their financial goals and needs, and then provide the investor with a holistic financial plan that focuses on a strategy that meets their needs.

Brokers are mostly large corporations, where financial advisory firms are small, independent business.

Although most brokers would say they have numerous products that can be suitable for the needs of an investor, they will generally favour the products of the investment company they work for, as there are often incentives paid which then drives sales of in-house products.

How are brokers remunerated and do they provide an ongoing service to clients similar to that of financial advisors?

Brokers are remunerated by commission based on the amounts of products sold and not necessarily the advice provided. This, in my opinion, is not providing any value to the client needs as once the sale has been done that is generally where it ends.

What are some of the disadvantages of dealing with a broker?

  • Not advisable to have your eggs in one basket and this is, unfortunately, the strategy of a broker, as they only provide in-house risk and investment solutions for individuals.
  • If there was any negative news that could impact the investment company, it could massively affect your investment portfolio.
  • Due to brokers being driven by the number of sales they make, it’s possible that the product they offer is not always in the best interest of the client.
  • Extremely limited or no after-sale services.

What can a financial advisor offer vs a broker?

The main role of the advisor is to help a client clearly understand their financial goals. When putting together a financial plan we are there to assist with understanding the objectives of the client, then put together a strategy to help the individual reach and achieve those goals.

An advisor can offer advice in a wide range option such as:

  • Pre and post-retirement planning;
  • Local and offshore investing;
  • Risk cover;
  • Cash desk deposits and forex transactions;
  • Tax assistance; and
  • Employee benefits.

What are the advantages of having a registered financial advisor to manage your portfolio?

  • A financial advisor manages relationships from a holistic perspective across multiple financial topics and provides a range of services and product solutions.
  • The advisor is an investment professional who assists clients with financial decisions.
  • Advisors are not tied to one product provider and can offer solutions via several different product provider and investment platforms.
  • Once a client has been assisted, they provide ongoing wealth management to that client by ensuring follow up meetings.
  • Category II advisors like Global & Local are able to provide that extra advantage of actively managing a client’s portfolio and when necessary making the relevant changes in the best interests of the client.
  • Advisors provide the peace of mind that they will always be available should you have questions relating to your portfolio.