Home » Terms » Independent Financial Advisor

What Is an Independent Financial Advisor?

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on May 16, 2022

An independent financial advisor is a professional or a financial firm that is not committed to any particular company.

The independent financial advisor offers unbiased advice on investing. This is because the independent financial advisor is not tied to a specific company that may be able to influence the advisor’s opinion on a particular company or investment option.

How to Check if One Is an Independent Financial Advisor

There are a variety of ways to check if the individual or firm is truly an independent financial advisor. A few ways to check include:

  • Seeing if they are associated with any companies in their advertisement materials, catalogs, or website
  • Confirming that they do not receive commissions from any investment recommendations
  • Finding out about their current affiliations via industry associations, publications, etc.

Why Would I Want to Work With an Independent Financial Advisor?

Financial advisors are trained professionals with experience working for large companies. They understand risk management, retirement planning, saving for college, and more.

They can offer personalized advice based on your individual situation and needs. He or she can help you trade stocks, options, mutual funds, or other investments as well as offer tax advice and retirement accounts.

An independent financial advisor can be a better option than a non-independent financial advisor chiefly because the former is not restrained to offer financial products that are offered by a certain company.

If the advisor only offers financial products from one company, there is less chance that they will recommend something outside of this line of products even if those products would have been beneficial for their clients.

The Benefits of Working With an Independent Financial Advisor

One benefit of working with an independent financial advisor is that he or she can offer unbiased advice. You can be assured that the advice you are getting from them is truly tailored for your specific needs.

These advisors can offer recommendations based on your personal situation, not push financial products that are only beneficial for the company. They want to do what is best for you rather than simply benefit their own bottom line.

The individual has no obligation to sell you any particular product, and hence their recommendations would be based on what they truly think is best for you rather than what their employer wants them to say or sell you.

The Downsides of Working With an Independent Financial Advisor

One downside of working with an independent financial advisor is that it may cost you more money in fees. While these fees may be slightly higher than those associated with other advisors, they are worth paying because you are receiving impartial advice from a professional who has experience with investment planning and risk management.

Another disadvantage of an independent financial advisor is that he or she may not always be available when you need assistance. This is because these advisors often work with many clients. While they are not tied to any company, there may be times when you will have to wait until the advisor is free or take on another client if he or she has an excessive amount of meetings that day.

Another potential downside is that this type of advisor works with many different people which means that they may not have experience in your exact situation. He or she can help but in some cases, it might be better to work with a specialist in the areas that are important for you personally.

Increase your understanding of the different types of financial advisors and what they can do for you. Read this article to know more: Understanding Financial Advisor Titles

Final Thoughts

Working with an independent financial advisor can offer numerous benefits, including unbiased advice and personalized investment planning. However, before working with one, it’s best to understand the benefits and downsides so you can choose if this is the best option for your needs.

Independent financial advisors are employees, not salesmen. They are paid hourly or as a flat fee to conduct financial planning sessions.
If you'd like unbiased advice on your investments or insurance, an independent financial advisor is the best choice because they don't sell any product. The advice is based purely upon what's in your best interest and can be trusted to help you grow your wealth over time.
You can have their affiliations checked but it also helps to call them directly and ask. They should answer this question with ease since it is in the public domain what kinds of relationships they have. If they seem hesitant when questioned or refuse to give a straight answer, then that could be a sign they are trying to hide something.
You can ask them if they receive any compensation from the company you would be putting your money in with them. They should answer truthfully with no hesitation. If the financial advisor refuses to give a clear-cut answer or becomes defensive, then it may be best not to work with this person as their interests might not be aligned with yours.
The latter is only beneficial when you want unbiased advice that is tailored for your specific needs and situation - which is why most people work with an independent financial advisor in the first place. There are often times when you might need access to a specific product which means that if you do not want to go through an independent financial advisor, it may be better to work with someone at a company who can recommend it for you. The downside is that they will also receive compensation from the company in this case and their interests may not always align with yours.

Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.