There are various types of financial and investment professionals with different expertise. Here are three of the common investment professionals that can help you make better financial decisions:
A financial advisor is a broad category for professionals that manage your money; whether it be helping with investments, brokering sales, creating estate and tax plan, and more. For example, a financial advisors could be a stockbroker, insurance agent, money manager, estate planner, banker, and more.
Financial advisors working the public must have a Series 65 among other licenses depending on the extent of their services. It should be noted though, receiving a license is not a difficult task and more research needs to be done to each individual financial advisor you may want. If you are to choose a financial advisor to manage your money, ensure they have a license and the proper credentials, along with experience, to manage your personal finance.
Financial planners are also types of financial advisors, but not all financial advisors are financial planners. Financial planners are types of financial advisors, typically having specialties in investments, taxes, retirement, or estate planning. Their main goal is in assisting individuals and companies creating programs to meet long-term financial goals. The best in the business are those that look at your entire financial profile, like your insurance, estate planning, tax planning, and investment management. While brokers only look at your investments, financial planners look at a broader picture to help you in the long term.
Always ensure that before handing over any money to your financial planner, check their credentials and ensure you understand what they will do with your money. They typically have certificates, but they are not required to have a license to claim to be a financial planner. To ensure that your planner is qualified, ensure they have certifications such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), and Certified Investment Management Analyst (CIMA).
Registered Investment Advisor (RIA)
While financial planners only manage around 20% of investments, RIAs focus on investments only. RIAs are financial professionals that advise on investments for a fee that is not paid from the sale/purchase of securities. RIAs are regulated by the Securities and Exchange Commission (SEC) or with some, mainly firms, regulated by the Financial Industry Regulatory Authority (FINRA).
RIAs offer a system of check and balances, where investor’s money is handled by a multi-billion dollar entity removed from their financial advisor. According to Forbes , RIAs are also less risky with investments due to their fiduciary duty . This requires RIAs to provide proper investment advice and always work in their clients' interests, holding a lower suitability standard that ensures the clients' investments are made suitable for the clients at the time they’re purchased.
Which One is Right for You?
As explained in the beginning, the license to practice is often not very difficult to get. Due to the lack of data-driven indicators, finding the right one for your personal finance becomes a challenging job. Keel offers historical track records to help you find which seasoned investors you can follow. In the next article, we will also walk through some tips to help you select the right one to manage your financials.