Subscribe

Advisor? Planner? Broker? Here are what the financial titles really mean

The list of financial titles goes on for a while. Use this article to keep track of the differences. 

  • close
    Howard and Kathy Powell meet with Alan Wardyga, a certified financial planner (2000).
    Melanie Stetson Freeman/The Christian Science Monitor/File
    View Caption
  • About video ads
    View Caption
of

Working in the financial industry, I’ve noticed that professional titles that should have distinct meanings get tossed around, intermingled and used interchangeably. As a result, they’re often misunderstood. Those of us in the industry might know the differences, but the average consumer might not. So here’s a short guide to what some of these titles actually mean.

Financial advisor

This is someone who provides financial advice to clients in return for compensation. Usually, this means the advisor has a so-called Series 65 license, or investment advisor license. However, the term “financial advisor” has become extremely generic and could apply to many different types of financial professionals, including all of the ones described below. So hearing that someone is a financial advisor really doesn’t tell you much about what exactly they do.

Broker

I hear this one all the time. A broker is someone who can sell you financial products. You used to have to go through a stockbroker to buy or sell shares of stock — before the days of online trading platforms. Today, we also have investment brokers, insurance brokers, mortgage brokers and others. Brokers sell products and make money from those transactions. They are legally held to a “suitability” standard, which means that all transactions they carry out for an investor must be suitable for that person. Just because an investment is “suitable,” however, does not necessarily mean it is in an investor’s best interest.

Recommended: Fifteen best entry-level jobs of 2015

Investment advisor representative

This is the official term for an advisor who gives financial advice to clients in return for compensation (see financial advisor, above). Unlike brokers and registered representatives (explained below), investment advisor representatives are held to a “fiduciary” standard under the law. That means the advisor must always place the best interest of the client first. It’s the highest standard for financial professionals and a much tighter standard than suitability.

Registered representative

A registered rep works for a brokerage company and conducts sales of investment products (mutual funds, stocks, bonds, etc.). A registered rep must pass the Series 7 (stockbroker) and Series 63 (securities agent) exams and be registered with the Financial Industry Regulatory Authority.

Financial analyst

When used as a general term, “financial analyst” usually refers to someone who works for a company and examines potential investments to see whether they could be profitable for that company. They work in all industries, and their “client” is their employer.

However, some financial advisors are Chartered Financial Analysts, or CFAs. These advisors do serve individual clients directly. The CFA — a trademark of the CFA Institute — is one of the more highly regarded designations in the financial industry and speaks to the ability of the advisor to analyze investments (usually stocks or other securities).

Financial planner

This is someone who helps individuals set financial goals and then devise a plan to reach them with the resources they have available. Financial planners have expertise in multiple areas, including tax planning, risk management, asset allocation, retirement planning and estate planning. Unfortunately, “financial planning” is another general term that gets used imprecisely, so it’s important to understand the credentials of those who identify themselves as financial planners.

The most widely recognized and respected credential for financial planners is the Certified Financial Planner, or CFP, designation. To earn the designation, a professional must complete a difficult curriculum that covers the full range of financial planning. CFPs can coordinate a plan that will tie each component of your financial life together. The designation is a trademark of the Certified Financial Planner Board of Standards. Through the CFP Board, designees are held to a fiduciary standard.

The bottom line

An array of professional titles is just one reason the financial world can seem overwhelming. But with a basic understanding of what these titles mean, you’ll have more clarity about whom you’re working with — or whom you want to be working with in the future.

This article first appeared at Nerd Wallet.

The Christian Science Monitor has assembled a diverse group of the best personal finance bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

About these ads
Sponsored Content by LockerDome
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
FREE Newsletters
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK