A Complete Guide: Different Types of Financial Advisors - Zoe Financial (2024)

What Is An Investment Advisor?

Investment advisor is the official title for Registered Investment Advisors (RIAs). An RIA is licensed by their state and/or the Securities and Exchange Commission (SEC) to offer investment advice and manage client portfolios.

,Investment advisors are held tothefiduciary standard,meaning they are legally required to act in their clients’ best interests.

What Does Acting In Your Best Interest Mean?

• Their recommendations & actions must accurately reflect your financial objectives, timeframes, and risk tolerance.
• They must strive to keep their own fees (as well as other fees) reasonable.
• They must avoid exposing their clients’ assets to excessive risk.

Unlike investment advisors and brokers, those who call themselves financial planners are not regulated or licensed. Technically, anyone can call themselves a financial planner.To bring credibility and accountability to the profession, a number of industry organizations have formed to award formal certifications to financial planners. The most well known is the Certified Financial Planner Board of Standards (CFP Board.)

To earn the CFP certification financial advisors must:

What Is A Registered Representative?

Back in your parents’ day, if someone wanted to invest in stocks or bonds they used stock brokers. Today, they’re generally just called brokers, because most of them make their living selling mutual funds and life insurance to clients rather than trading securities. Their formal name is Registered Representative (RR). They work for broker dealers, and are licensed and regulated by the Financial Industry Regulatory Authority, or FINRA. Unlike investment advisors, brokers are not paid directly by clients, instead, they earn commissions for trading stocks and bonds, and for selling mutual funds and other products.

What Are Financial Consultants & Wealth Managers?

Like the term financial advisor, financial consultantand wealth manager are both generic job titles that do not require licenses or certifications.In the past, financial consultant was often used by brokers who offered financial-planning services. Likewise, in recent years, wealth manager has emerged as a marketing term to describe financial advisors who focus on high-net-worth clients, usually those with $5 million or more in investable assets. They’re almost always licensed as investment advisors and brokers, and a growing number are CFP^® professionals.

What Is The Best Type Of Financial Advisor?

If you’re looking for an investment professional it’s important to fully understand the differences between investment advisors and brokers. Hiring the wrong one for your needs can have serious impacts.

At Zoe Financial, we believe that fiduciary and independentinvestment advisors– those who bill clients directly without earning commissions – are the best choice for most investors. But having the right designation and fee structure should not be enough: finding an advisor who truly has a client-centric (and financial planning-centric) practice should be the goal in our mind.

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