There's no shortage of people who are willing to advise you on financial issues. But before you choose someone to help you manage your money, you should understand the different types of financial planning models. Historically, the financial advising industry has focused on investments, which is why many people think of money management when they think of "planning." Recently, however, the definition of planning has evolved so it now encompasses much more than just investments.

Let's examine four types of financial professionals, the service they provide and how they get paid: insurance agents, accountants, traditional brokers and independent financial planners.

Life Insurance Agents

Historically, life insurance agents primarily sold some form of life insurance on a commission basis. Several years ago, however, insurance companies realized that it was important for their life insurance agents to do more than just sell insurance. Today, many life insurance agents focus on both life insurance and investment-oriented products. Typically, they have access to proprietary products associated with the insurance company they work for. Life insurance agents provide an excellent insurance platform for their clients, while also trying to add value to their clients' investment portfolios.

"You're most likely to find true planners within the world of independent financial planning." [ Tweet this ]

Accountants

The accounting industry, as a whole, tried to make changes to its business models about 12 to 15 years ago. Like insurance agents, accountants realized they were leaving money on the table by focusing solely on accounting. As a result, many accountants opted to include financial planning on their service menu.

The changes came in two forms. Many accountants tried to do financial planning on their own, in addition to tax work. However, most realized they couldn't really offer effective financial planning services on their own. They had to rethink how���and if���they were going to offer financial planning to their clients. The accounting firms that were able to effectively expand their services were typically those that brought in experienced financial planners to do the work for their clients. These firms approached financial planning in its truest sense and were compensated through either a fee or a commission for their work.

Traditional Brokers

When many people think of financial planning, they think of a traditional broker. Brokers are typically employed by large, well-known financial institutions, and they are well versed in portfolio management. Traditionally, brokers were paid a commission for each transaction they generated for the client, whether it was a stock or bond trade or selling a mutual fund.

This broker model has evolved as well. Many large brokerage firms now offer their own version of financial planning. The assets-under-management model, where the planner gets paid an annual fee to manage the money, has become the platform of choice. Of course, many brokers still work on a traditional transaction-to-transaction basis. Increasingly, however, brokers are embracing the assets-under management fee model. Independent

Financial Planners

Finally, there are the independent financial planners. These financial planners do not have managers telling them what to sell; they make their own decisions. More successful and mature financial planning firms that are associated with larger independent broker-dealers are able to offer an enormous selection of investment products to their clients. You're most likely to find true planners within the world of independent financial planning. These individuals are focused on providing complete financial planning to clients; their services go far beyond selling the investment-related products that those working in other sectors focus on.

Currently, independent financial planners tend to be paid in one of two ways. Some charge a fee to client in exchange for a plan, plus a fee to manage the client's money. Others still sell commission-based products to their clients. In either case, the independent financial planner typically has a more consultative approach than a person who is focused on product sales.

I am an independent financial planner. I am biased in terms of what I believe is the best model—that is the model that I have embraced over the past 25 years I've been serving my clients as a CERTIFIED FINANCIAL PLANNERTM professional. But I also recognize the benefit of having a different approach. Just as Baskin Robbins has 31 different flavors, the financial planning industry needs to offer different flavors to potential customers. You may like chocolate chip, but someone else may like butter pecan. It is important to have a flavor that matches each customer. The same holds true in our industry.

The Responsibility Is Yours

Remember, there are several different models for “financial planning.” As a customer, the burden is on you to make sure that you are aligning yourself with the professional who is right for you and who will help you reach your goals.

About Mark Singer

Mark Singer is a CERTIFIED FINANCIAL PLANNER™ professional and the author of The Changing Landscape of Retirement—What You Don't Know Could Hurt You. He has been The Retirement Guide to thousands of investors for close to 25 years and is the creator of the Retirement Roadmap, which contributes to a solution to investors' greatest concerns–properly coordinating their financial affairs. These systems have become a primary resource for the people who have worked with Mark over the years. You can download the first chapter of Mark's new book for free by Liking it on Facebook.