Types of Financial Advisors

As Seen in WSJ | Buy Side Dated 8/19/2025 Written By Molly Grace

Explore the different categories of financial advisors—from RIAs to robo advisors—to determine which expert aligns with your financial planning needs

Key takeaways

• There are many different types of financial advisors. The right one for you will depend on your unique financial needs.
• Financial advisors can offer comprehensive financial planning, investment advice, hands-off automated investing or some combination of all of these services.
• As you search for a financial advisor, consider how they're paid, whether they're a fiduciary and if they offer the services you're looking for.

There are a lot of different terms used to describe financial professionals, which can make it hard to know which one is right for you. But you can make your search easier by knowing what types of services you're looking for.

What are fee-only financial advisors?

There are three main ways that financial advisors earn money:

• Fee-only: Financial advisors who are fee-only are solely paid by their clients and don't earn commissions selling financial products.
• Fee-based: With this pay structure, advisors are paid by their clients, but they can also earn commissions selling financial products like insurance to their clients.
• Commission-based: Some financial advisors are only paid through the commissions they earn selling financial products to clients.

Bridget Grimes, a certified financial planner and president of WealthChoice, says the way an advisor is paid can potentially present a conflict of interest. If an advisor relies only on commissions, they might recommend products to you that aren't necessarily in your best interest.

Fee-only advisors, she says, don't have that same conflict of interest.

“That person who's going to give you guidance is going to be agnostic when it comes to investments,” Grimes says.

It's common for advisors to charge a fee based on a percentage of the assets they manage for you, but you might also come across advisors who charge hourly fees, flat fees or retainers.

Fiduciary financial advisors

Advisors who are held to a fiduciary standard are obligated to make recommendations that are in their clients' best interests. Not all financial advisors are held to this standard.

“There are two different standards in the industry, there's a suitability standard and a fiduciary standard,” says Kathryn Berkenpas, a certified financial planner and managing director of corporate growth at CFP Board. “Suitability means you have to meet the requirement that it is suitable for the client. But that doesn't mean it's absolutely in the client's best interest.”

Fee-only financial advisors typically operate under a fiduciary standard, while advisors who earn commissions might only be held to a suitability standard.

Certified financial planners (CFPs) are held to a fiduciary standard by the CFP Board, the organization that offers the CFP certification. Registered investment advisers (RIAs) are required by law to act as fiduciaries.

What are robo advisors?

Robo advisors use technology to create investment portfolios for users. They automate the investing process and make it easy for beginners to start investing. Robo advisors can be used for both general investing and retirement saving.

“We typically see robo advisors used for a retirement plan,” Berkenpas says. “So [robo advisors are used] to give an asset allocation for a pot of money, to grow that pot of money to be the right size at the right time.” But they're limited in how much they can help you with your overall financial plan.

When you open an account with a robo advisor, you'll typically answer some questions about your financial situation, retirement plans and risk tolerance to help the algorithm build a portfolio that suits your needs. Then it will automatically manage your funds, rebalancing your portfolio as needed.

Robo advisors often have lower account minimums and advisory fees compared to traditional advisors, which is why they can be a good choice for new investors. You might want to work with a financial advisor instead of a robo advisor if you have more complex financial needs or a larger portfolio.

What are broker-dealer advisors?

Broker-dealers are financial professionals or institutions that buy and sell securities for their own accounts and on behalf of their customers.

“A broker-dealer is a wirehouse,” Grimes says. “These are, for example, Morgan Stanley and UBS. They're traditionally seen as more investment-forward. When I worked at a broker-dealer, they were investment-forward. We did not do financial planning.”

Broker-dealers vs. RIAs

Broker-dealers buy and sell investments on behalf of their clients and generally earn a commission on those transactions. RIAs focus more on managing their clients' portfolios and giving them investment advice. RIAs typically earn money through fees paid by the client.

However, there's more overlap between broker-dealers and RIAs now than there used to be, Berkenpas says. Many firms now offer both types of services.

What are hybrid advisors?

Individuals or firms that offer both brokerage services and investment advising services are known as hybrid advisors. A hybrid advisor might earn both commissions on investment transactions and charge a fee based on the assets they manage for you.

“It used to be that they had different compensation structures and legal structures, and some followed the suitability standard, and some followed the fiduciary standard,” Berkenpas says. “A broker-dealer can be a hybrid now and also work as an RIA.”

Because they're RIAs, hybrid advisors are held to a fiduciary standard, so they have to recommend financial products that are the best fit for your situation.

Hybrid robo advisors

You might also see the term hybrid advisor used to refer to a type of robo advisor service that includes access to a financial advisor. Hybrid robo advisors can be a good middle ground between a completely hands-off automated investment strategy and comprehensive planning offered by an investment advisor or financial planner. But some robo advisors require higher account minimums or charge higher fees to have access to a financial advisor.

How advisor services vary by specialization

Financial advisors can offer a wide range of services, but both Berkenpas and Grimes warn that relying on the terms advisors use to describe themselves isn't always the best way to get a sense of what those professionals offer.

“You can't choose the best professional for what a consumer is looking for based on compensation, job title or strictly if they're at a broker-dealer or if they're an RIA,” Berkenpas says. “It's really about finding out what the professional does and what you need as a consumer.”

Grimes says that, as you interview potential advisors, you should ask questions about what services the person offers so you can understand “whatever they're calling themselves, are they able to provide the guidance that you're looking for?”

Who should consider each type of financial advisor?

To find the right type of financial advisor for you, think about what you need. If you're looking for comprehensive portfolio management or financial advice, an RIA or CFP may be a better choice than a robo advisor, for example. In this case, you might also want to prioritize working with a professional who's held to a fiduciary standard, or someone who doesn't earn any commissions.

But if you're early in your career and want to start putting away money for retirement, having a portfolio with a robo advisor might be all you need.

If you're considering working with a financial advisor, interview a few different candidates to find out what types of services they offer, how they're paid and what types of clients they work with, Grimes says.

“Are they familiar with people like you and the challenges you have?” she says. “If you're working with somebody who has a totally different life experience, I'm not so sure that that's the best person to guide you.”

FAQ

What is the difference between a fiduciary and non‑fiduciary advisor?

A fiduciary advisor is legally obligated to act in their client's best interest—regardless of whether it financially benefits them—and disclose any conflicts of interest. A non-fiduciary advisor is not bound by the same legal standards as a fiduciary financial advisor. They are obligated to make suitable recommendations for their clients and might earn a commission from the investment products that they sell.

Do robo advisors work for high-net-worth clients?

Robo advisors, which offer automated portfolio rebalancing, could be a convenient option for clients in need of a more hands-off approach. Traditional financial advisors might make more sense for high-net-worth individuals who have complex financial needs and are looking for customizable, comprehensive portfolio options. Some robo advisors also offer a hybrid option where you can consult with a financial advisor, which might provide a happy medium.

Can I switch between advisor types over time?

Yes, you can switch between a robo advisor and a human advisor if your needs change over time. You can also opt for a hybrid advisor, which combines the cost-effective and convenient aspect of a robo advisor with the hands-on, personalized advice that a traditional financial advisor offers.

Are hybrid advisors more expensive than robo advisors?

Hybrid advisors are typically more expensive than robo advisors but more affordable than traditional advisors. It's common for hybrid advisors to charge between 0.30% and 0.65%. Robo advisors charge a median annual fee of 0.25% of assets under management (AUM), according to the most recent Morningstar robo advisor report, and traditional advisors charge 1.05% AUM on average, according to a 2024 Envestnet advisor survey.

How do financial planner credentials differ across advisor types?

There are many different credentials that financial advisors can have, though they aren't necessarily confined to specific types of advisors. Around 1 in 3 financial advisors are CFPs, according to the CFP Board. As advisors, CFPs can offer holistic financial planning or have a more specific focus like investment management. Chartered financial consultants (ChFCs) also receive financial planning training and might create comprehensive plans for clients. An advisor who focuses more on investing might also have a chartered financial analyst (CFA) credential, while an advisor with an accredited financial counselor (AFC) certification might focus more on helping clients with budgeting and debt reduction. Retirement income certified professionals (RICPs) cater to clients planning for retirement.