Whether you're planning for retirement or simply creating a personal budget, it doesn't
hurt to get help from an expert.
Luckily, there's no shortage of financial experts offering advice these days.
But, every person's financial situation is unique and may require the services of
a specialized financial professional.
In this video, we'll discuss some common financial professional designations, identify
key differences between them, and explain why you may choose to work with a financial
advisor.
When you consider the service providers you trust most and who might impact your life,
your financial advisor might rank up there with your doctor or lawyer.
But what exactly is a financial advisor?
Put simply, a financial advisor refers to anyone who helps people manage their money.
Think of it as a general title that other more specific titles fall under.
Just as the term doctor could describe a pediatrician, cardiologist, or surgeon, the term financial
advisor is a general descriptor.
Titles like stockbroker, financial planner, and investment advisor are more detailed and
refer to specific experts with different experience and skills.
Stockbrokers, for example, buy and sell stocks and other securities on behalf of clients,
usually for a fee or commission.
Financial planners take a more holistic approach to your financial situation, looking at areas
like estate and retirement planning, insurance needs, and personal finance.
And investment advisors are specialized financial professionals that will create an investment
portfolio based on your goals, timeline, and risk tolerance, helping you build, manage,
and transfer wealth.
Within each of these professions are even more specific designations.
One of the most common designations is the Certified Financial Planner, or C-F-P.
A CFP is a credentialed professional held to strict ethical and performance standards.
Every prospective CFP must have a minimum amount of financial planning experience and
pass a board exam that covers financial planning, insurance, taxes, retirement, and estate planning.
Another designation is the Chartered Financial Consultant, or C-h-F-C.
While the ChFC and the CFP have slightly different requirements for candidates, they're similar
in practice.
Both are distinguished certifications in the financial industry.
While many financial professionals can call themselves financial advisors, only certain
ones are able to call themselves Registered Investment Advisors, or RIA.
An RIA, is a specialized type of financial professional that is registered with the Securities
and Exchange Commission and/or a state securities regulator.
RIAs focus on investment advice around stocks, bonds, mutual funds, and other securities.
They recommend what and when their clients should buy, sell, or hold depending on market
conditions and their client's goals.
Whereas many financial planners operate under a suitability standard, meaning recommendations
they make must be based on a client's objectives and risk tolerance, RIAs operate under a stricter
fiduciary standard.
This standard legally requires advisors to put their client's interests above their own.
For example, RIAs are prohibited from buying securities for their own account prior to
buying them for a client.
In addition, they must do their best to make sure investment advice is made using accurate
and complete information, and must disclose any conflicts of interest.
Many people turn to an RIA for portfolio management and retirement planning.
As a long-term financial partner, an RIA will guide your investment choices and manage your
money, providing comprehensive financial planning throughout life's stages.
So why would someone consider using a financial advisor?
The answer varies greatly based on an individual's financial circumstances.
You might have questions around a specific situation such as buying a house, getting
married, or paying for your children's education.
Maybe you want help with insurance, tax guidance, or debt counseling.
Or you may simply need to build a long-term financial roadmap.
Ultimately, every person's financial situation is different.
It's important that whichever type of financial advisor you choose has the skills and experience
best suited for your circumstances.
An advisor should be able to assess your financial needs to help you achieve your goals.
A great financial professional will act in your best interest and be committed to providing
unbiased advice to help you plan for an uncertain future with confidence.