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Personalized guidance to grow your wealth needs the right type of financial advisor. Compare CFPs, investment advisors, robo-advisors and other professionals.
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Financial advisors can come with various certifications, credentials, acronyms, and responsibilities.
However, there are no requirements that someone who calls themselves a financial advisor undergo training, certification, or upkeep a fiduciary duty to their client. There are limitations to where and how you can practice without certain credentials.
Knowing what knowledge, specialties, and duties different types of financial advisors have will help you choose the right professional for your goals.
Learn more about these financial professionals and tips to hire the right advisor below.
Registered investment advisors specialize in security investments (stocks, bonds, mutual funds, etc.). They’re fiduciary advisors required to provide recommendations that align with the client’s best interests, typically registered with the U.S. Securities and Exchange Commission (SEC).
Beyond investment management, RIA financial services include retirement planning, estate and wealth management, budgeting, insurance, and more.
Note that the RIA is a financial firm, not a specific advisor. RIAs hire qualified investment advisor representatives (IAR) to assist clients. IARs will have different expertise and certifications, so research both your RIA and the firm’s IARs when choosing an advisor. You can search online databases to learn more about specific firms and advisors.
Certified financial planners are fiduciary advisors with a broad range of qualifications to help you form a comprehensive financial strategy. The certification requires years of study and experience to prove fluency in various financial planning services, including tax, retirement, investment, and estate strategies.
These finance professionals are also held to a strict code of ethics that outlines a fiduciary duty to provide honest advice and act in the client’s best interest. Other planners have their own code of ethics, but a CFP’s fiduciary duty sets their standard apart.
CFPs can help you achieve most of your financial goals. Some CFPs may have specializations like retirement planning or tax strategies, but all of them can help you with large goals like saving for college or adjusting your current budget.
Financial professionals can enroll in the American College’s chartered financial consultant program to become a ChFC. These advisors complete 27 college credit hours of an integrated financial planning curriculum. They also have to complete continuing education hours to keep the credential.
ChFCs are experienced in various financial planning services and specifically train for real-life scenarios like divorce, guardianship, and other situations clients may experience to provide fiduciary support.
Robo-advisors are accessible alternatives to human advisors and use algorithms to provide recommendations based on your financial situation. They’re good for traditional investments using long-term passive index strategies.
Robo-advisors manage, evaluate, and rebalance portfolios based on modern portfolio theory. Users can access their investments and performance 24/7, but investments are informed by the user’s defined financial goals rather than individual choices.
That said, many robo-advisors partner with CFPs and financial coaches to offer human services for a fee.
These advisors are also limited in investment opportunities and provide financial services. Robo-advisors are ideal for users with a clear understanding of their current financial status or objectives.
Wealth advisors specialize in financial strategies for high earners and families. Available services vary, including tax planning, investment strategies, and retirement planning. However, these advisors are experts at managing the particular needs and financial regulations of multi-million-dollar investments.
Wealth advisor isn’t an official designation, but a specialty that CFPs use to brand themselves when they work with high-net-worth clients.
Investment advisors are also called portfolio or asset managers. They focus on managing investments, including client recommendations, portfolio rebalancing, and asset maintenance.
Portfolio managers include RIA firms and the individual IARs that work for them. Individual investment advisors are also available and must register with either the SEC or the state securities regulator.
Chartered financial analysts are internationally recognized and highly respected financial advisors certified by the CFA Institute. CFAs maintain some of the most rigorous certification requirements, with expectations that applicants study at least 300 hours a year for three years to adequately prepare for CFA exams.
CFAs are experts in investment consulting, portfolio management, and risk management. Because of their high expertise, they’re not as common as CFPs or ChFCs and typically work for institutions rather than independently.
Financial coaches help educate clients on money matters and provide support to help them develop financial goals and strategies. Coaches aren’t regulated and don’t have any certification, education, or experience requirements, though some coaches are also credentialed financial professionals.
Nonprofits may hire or train financial coaches to assist specific communities, like retired military or low-income adults. Independent coaches are also available online and in person.
Coaches provide support and education and may help you make a budget or savings strategy. However, they likely won’t help you purchase stocks or create a comprehensive investment strategy.
Money sometimes has emotional and mental strings attached that can make financial planning challenging. Financial therapists tend to the thoughts and feelings around money that may affect an individual’s financial well-being.
Therapists can assist in financial education, overcoming negative thoughts and barriers to financial management, or addressing problematic behaviors like gambling. The goal is to create a healthy relationship with money and confidence to manage personal finances.
Certified financial therapists are trained in financial therapy, financial planning and counseling, and therapeutic competencies. They’re also expected to adhere to the Financial Therapy Association’s Code of Ethics with a fiduciary standard.
The right financial advisor for your situation depends on your current net worth, financial objectives, experience, and budget. CFPs are a good fit for most basic financial needs and comprehensive plans, while an investment advisor may be best for growing your wealth.
Explore these considerations when determining who to work with.
Do you want budgeting advice to support your savings goals? Or maybe you inherited a large sum of money and need wealth management advice? Your current situation and objectives are among the biggest factors in choosing an advisor, and you can always change advisors as your goals evolve..
Advisors with specialized certifications can also assist with specific needs like retirement and estate planning.
Depending on the type of advisor you’re working with, many have to register either with the SEC or the business’ state securities regulator. They may also have memberships with FINRA, the National Association of Professional Financial Advisors (NAPFA), and other organizations.
Search specific advisors and firms with online databases to learn more about their credentials and experience.
Many credentialed financial advisors are held to a fiduciary duty or specific code of ethics that requires them to work in the client’s best interest.
Some regulations are more vague, like broker-dealers that must provide recommendations that align with your investment goals but may also make recommendations that suit their interests (known as the “suitability standard”).
CFPs, investment advisors, and others with clearly defined ethical duties are generally ideal. However, fiduciary advisors may have more limited investment opportunities. So, folks with high risk tolerance or a particular investment goal might be more interested in working with a broker-dealer.
Additionally, not all financial services require a fiduciary relationship. Financial therapists, for example, focus on the emotional and psychological aspects of finances rather than specific planning and investment advice.
Unless you need ultra-specific advice or are working with huge sums of money, a CFP can help you assess your financial situation and form a comprehensive financial strategy.
That said, CFPs can be expensive. If you’re ready to take charge of your investments, consider a robo-advisor to automate your investments and maximize your tax efficiency.