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What are the Different Types of Financial Advisors?

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There are many financial advisors who offer general financial advice but differ in their areas of expertise and the kind of financial services they provide. Advisors may also differ based on their areas of specialization, such as tax management, wealth management, investment management, debt management, retirement planning, estate planning, and more.

Based on the kind of financial advice you are looking for, there are several kinds of advisors that may fit the bill, such as investment advisors, financial planners, wealth managers, retirement planners, stockbrokers, portfolio managers, robo-advisors, accountants, insurance agents, and more. Make an informed decision by choosing a suitable financial advisor after thoroughly understanding the different types of advisors, the financial services they provide, and carefully assessing their credentials.

This article explores the different kinds of financial advisors you can choose based on your unique financial needs and present and future goals.

The different types of financial advisors you may choose from are as follows:

1. Financial planners

Financial planners help clients manage their money and reach their long-term financial goals. Apart from creating a comprehensive retirement plan, these advisors help design a budget, select investments, manage taxes, create wealth, and choose an insurance plan. Moreover, these professionals also help if you want to start a business, save money for retirement, reduce your debt, or create an estate plan to secure your loved ones' future.

2. Investment advisors

Investment advisors help select the best investments for their clients per their needs, goals, and risk tolerance. Apart from managing and diversifying a client’s portfolio to limit their exposure to market risk, investment advisors also act as fiduciaries, which entails that they must always act in the best interests of their clients. These advisors charge a fee for conducting security analysis and recommending investments that match the risk profile, needs, and goals of the investor. Investment advisors must register with the U.S. Securities and Exchange Commission (SEC) if they manage assets worth $100 million or more. Generally, investment advisors charge a percentage (1% or more) of AUM.

3. Retirement planners

Retirement planners help create a customized retirement plan based on a client’s financial needs and goals to ensure they are financially secure in the later years of their lives. In addition, they help you choose suitable investments, create a budget, reduce your tax bill, create a debt repayment plan, and choose an insurance plan that provides adequate cover for your future health expenses. You can also consult a retirement planner to iron out an estate plan that ensures your wishes are met after your demise and your assets are distributed to your heirs without any hassles.

4. Wealth managers

As the name suggests, wealth managers tend to work with high-net-worth individuals (HNWI). They are experts when it comes to wealth preservation and can provide assistance in matters pertaining to tax planning, investment planning, insurance planning, estate planning, making charitable donations, creating trusts, and more. You can also consult wealth managers if you want to write a will, get advice on philanthropic activities, or need help creating a business succession plan. Typically, wealth managers charge a fee based on a client’s AUM.

5. Portfolio managers

Portfolio managers are responsible for investing a fund's assets, enforcing the fund's investment strategies, and managing the client’s investment portfolio. Portfolio managers can be either active or passive. Active portfolio managers adopt an active approach to investing and try to beat average market returns consistently. On the other hand, a passive portfolio manager’s investment strategy mirrors a specific market index. The market index is used as a benchmark to mimic the returns of that specific market index.


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6. Robo-advisors

Robo-advisors are digital platforms that offer automated financial planning and investment services based on algorithms that require minimal human supervision. These advisors are inexpensive and require low opening balances, making them ideal for new investors who lack sufficient financial knowledge or experience. Potential clients need to fill up a short risk-profiling questionnaire that offers insight into their unique financial situation, risk appetite, future goals, etc., based on which it generates suitable recommendations. Robo-advisors typically charge around 0.25 to 0.5% of AUM per year.

7. Insurance agents

Buying the right insurance plan is essential to secure the golden years of your life. You need to consider several aspects when buying insurance - what needs you want to cover, how much insurance premium you are willing to pay, which insurance provider to choose, which plan to select, etc. Needless to say, this is a challenging and exacting process. However, you can consult with an insurance agent who can help evaluate your financial situation, compare policies from different insurance providers, and suggest a plan that best fits your budget and needs.

8. Stockbrokers

Stockbrokers are professionals who buy and sell financial products such as stocks, bonds, and mutual funds on behalf of clients. They require a state license (FINRA Series 7 and Series 63 or 66) to practice and be sponsored by a registered investment firm. Stockbrokers serve as intermediaries, taking customer orders and buying securities on the markets on their behalf. In return, they earn a commission based on the securities sold by them.

9. Accountants

Accountants are professionals who conduct several accounting functions, such as an audit or analysis of accounts and financial statements. Apart from the above, they must maintain financial records and file timely tax returns to avoid penalties. Further, accountants must ensure that you have filed for all possible deductions you qualify for to reduce your tax liability. Some of the common accounting designations include Certified Public Accountant (CPA), Certified Internal Auditor (CIA), and Certified Management Accountant (CMA).

What financial credentials should you consider when hiring a financial advisor?

Make sure you do your due diligence before you hire a financial advisor. This includes checking an advisor’s certifications and credentials. Some of the recognized financial credentials are:

  1. Certified Financial Planner (CFP)
  2. Chartered Financial Consultant (ChFC)
  3. Chartered Financial Analyst (CFA)
  4. Certified Investment Management Analyst (CIMA)
  5. Certified Public Accountant (CPA)

Financial advisors come under the purview of the SEC, and state and local agencies.

To conclude

It is advised that you seek professional help and guidance to better prepare for your financial future. However, before you hire a professional financial advisor, check their prior work experience, credentials, area of expertise, and the fees they charge. Most of all, ensure that the advisor is a good match for your specific financial needs. It is important to choose an advisor that you feel comfortable with.

Use the free advisor match service to find a vetted financial advisor who can help attain your financial goals and better manage your finances. Answer a few simple questions based on your financial needs, and the match tool can help connect you with 1 to 3 financial advisors who are best suited to help you.