You're an investor who wants to avoid the wire houses. You are in the market for an independent financial planner or financial advisor who does not work for a large firm such as Wells Fargo or Morgan Stanley. That covers a lot of territory, but ultimately all such planners and advisors who manage assets (other than annuities or life insurance) ultimately fall into one of two categories: They can either be registered investment advisors (RIAs) or registered representatives that work for an independent broker-dealer.  That there are several different ways that these professionals can provide and charge for their services.

The RIA Side

Regulated directly by the Securities and Exchange Commission, RIAs are are considered to be acting in a fiduciary capacity, and so held to a higher standard of conduct than registered representatives. This fiduciary standard mandates that an RIA must always unconditionally put the client’s best interests ahead of his or her own, regardless of all other circumstances. (See also: Brokers and RIAs: Are They the Same?)

RIAs are also required to disclose any possible conflicts of interest to their clients and act in an ethical manner in all of their business dealings. Some RIAs charge clients a percentage of their assets under management while others charge either an hourly or a flat fee to dispense advice. Advisors who choose this model for their practices must obtain a Series 65 license.

Independent Broker-Dealers

Registered representatives who work for major wire houses are often told what products to sell, what stocks to recommend and how they can conduct their business. Reps who work for Independent broker-dealers do not have these restrictions, and they usually have a much wider selection of products and services for their clientele than wire-house brokers.

Independent broker-dealers are equipped to offer a full range of investment offerings that can go far beyond mainstream vehicles such as mutual funds and annuities. Many of them provide alternative investments such as hedge funds, tax credits, nonqualified plans and IPOs, sometimes marketed in sophisticated investment or retirement programs that are tailored to specific groups or professions such as doctors or dentists. Planners who work as reps for this type of company will charge you a commission to purchase an investment, but they may have some leeway in how much they charge for a given type of transaction. (See also: Independent Broker-Dealers: What You Should Know.)

Which One is Better?

When it comes to choosing a planner, it may seem like an RIA would be the obvious choice. But the fact is that many planners who work on straight commission also act very ethically and put their clients’ best interests ahead of their own. Being a RIA also doesn’t guarantee a certain level of competence, as the Series 65 exam deals chiefly with federal securities laws and regulations. (See also: RIAs and Brokers: What's the Difference?)

And to further complicate the matter, many independent brokers also carry the Series 65 license so that they can offer turnkey managed money programs that provide active professional management. Some RIAs are likewise affiliated with a broker-dealer so that they can offer products such as variable annuities, which do not lend themselves to a pure RIA platform.

The Bottom Line

RIAs and independent brokers both have considerable freedom in how they operate their businesses. RIAs are bound by a fiduciary oath, while independent brokers may have access to specific products or services that are hard to find elsewhere. The right choice for you is most likely going to depend more on the person rather than the business model. When you find an advisor who you feel truly comfortable with, the business model that they use will likely be of secondary importance. (See also: The 15 Fastest-Growing RIAs.)