Types of Financial Advisors

A financial advisor can map out your financial future, create a plan to keep your money goals on track and help you avoid costly mistakes.

There are a lot of different types of financial advisors out there, from investment managers and wealth managers to certified financial planners, financial coaches, and financial consultants.

In the guide below, we’ll break down the most common types of advisors to help you hire the right one for your financial situation.

Types of Financial Advisors

Here’s an overview of the most common types of financial advisors.

1. Registered Investment Advisors

A registered investment advisor (RIA) offers individually tailored investment advice and portfolio management services.

Investment advisors are held to a fiduciary standard, so they’re required by law to act in their clients’ best interests. These advisors must pass the Series 65 (Uniform Investment Advisor Law) exam administered by the Financial Industry Regulatory Authority (FINRA).

They also have to register with the Securities and Exchange Commission (SEC) or a state securities regulator. Who an advisor registers with depends on the amount of money they’re managing. If they’re managing $110 million or more in client assets, they’re required to file with the SEC.

To verify that an investment advisor is properly registered, use BrokerCheck, a site run by FINRA. You can enter the name of the advisor or firm you’re considering to learn about their education, business history, disciplinary actions, and licensing.

Learn More: What is an Investment Consultant?

2. Brokers

Brokers and broker-dealers buy and sell securities for their clients. These financial professionals are required to register with the SEC and FINRA, pass several exams, and get licensed by their state securities regulator.

The types of financial products stockbrokers can sell depend on which licenses they hold. For example, brokers who’ve passed the Series 6 exam may sell mutual funds and variable annuities, while Series 7 brokers can sell additional securities like stocks, bonds, and options.

While brokers are technically required to act in their client’s best interest, they may also earn commissions, which could be a conflict of interest. Keep in mind that many professionals are dually registered as both a broker and an investment advisor.

To find out if your prospective advisor is an RIA, broker (or both), look them up on BrokerCheck. If they’re a broker or dually registered, make sure you understand exactly how they get paid.

3. Certified Financial Planners

Certified financial planners (CFPs) pass challenging exams and meet extensive training and experience requirements to gain their certification from the CFP Board.

CFPs also have to renew their certification every two years, which requires them to stay educated on financial products and industry trends. Like RIAs, they’re held to a fiduciary standard.

A CFP can help you reach your money goals by constructing a comprehensive financial plan. They can advise you on taxes, retirement planning, estate planning, life insurance, and more.

To verify an individual’s CFP certification and background, search an individual on the CFP Board of Standards site. The site can also identify individuals who are not currently certified but were at one time.

4. Robo-advisors

Robo-advisors are an affordable alternative to traditional investment advisers. Rather than having a CFA or CFP help with your financial needs, robo-advisors use an algorithm to invest for you.

These platforms ask questions to determine your investing goals, risk tolerance, and investing timeline. Then, they build a diversified investment portfolio around your goals and preferences and automate your investments.

Most robo-advisors charge a minimal flat fee, often as low as 0.25% of your account balance.

If you’re looking for a hands-off approach to investing and don’t need in-depth financial planning services, a robo-advisor is a solid option for low-cost investing.

5. Financial Consultant

“Financial consultant” is a general title that anyone can use, but some financial consultants may be designated as chartered financial consultants (ChFCs).

These professionals offer financial advice on an array of topics, helping clients with taxes, investing, insurance products, estate planning, and reaching financial goals.

Like CFPs, chartered financial consultants are held to a fiduciary standard, so you can trust that they’re acting in your best interest. They also complete similar education and training requirements to gain certification from the American College of Financial Services.

In terms of cost, ChFCs are similar to CFPs. Some charge annual AUM fees, while others charge hourly consulting fees or work on commissions.

You can use Designation Check to verify a financial consultant’s certification.

6. Wealth Managers

Wealth managers primarily work with affluent clients who have large estates to manage. They specialize in advising wealthy individuals on a range of financial topics, from charitable giving to accounting and estate planning, along with providing investment advice.

While fee structures can vary from one advisor to the next, most wealth managers charge an AUM fee. They also have higher minimum account requirements than other types of financial advisors, typically requiring clients to invest millions of dollars of assets to be eligible for their services.

Most wealth managers or wealth advisors are licensed as CFPs and chartered financial analysts (CFAs). If you’re a high-net-worth investor looking for holistic financial planning services, hiring a wealth manager from a reputable investment firm is a wise choice.

7. Financial Coach

A financial coach is a type of advisor who offers basic personal finance advice. Rather than acting as an asset manager and soliciting investing advice, they hone in on the basics, like creating a budget, paying off debt, and boosting your savings.

Financial coaches help you get to the root of your financial habits and foster a healthier relationship with your money so you can make healthier financial decisions.

Financial coaches aren’t required to carry a set professional designation like some of the other types of advisors in this guide, but they may get certified by organizations like the National Financial Educators Council.

How to Choose the Right Type of Financial Advisor

Keep the following considerations in mind to choose the right financial advisor:

• Consider the cost: Advisors use different fee structures, and it’s important to work with one that fits your budget. Ask prospective advisors whether they work on commissions, are fee-only advisors, or are fee-based. Fee-based advisors use a hybrid approach, meaning they can charge fees and earn a commission.
• Know your needs: The right type of advisor for you depends on your financial goals. If you’re a beginner investor looking for affordable portfolio management, a robo-advisor could be the right fit. Meanwhile, if you’re looking to invest $1 million and get expert advice for all aspects of your financial life, you may want to hire a wealth manager.
• Niche down: As you research your options, be sure to ask prospective advisors if they specialize in working with clients of a particular age range, income level, or financial situation.
• Hire a fiduciary: Regardless of the type of financial advisor you choose, it’s crucial to work with a fiduciary who is legally required to be transparent about conflicts of interest and put your interests first. That way, you can rest assured knowing your advisor is making decisions that benefit you first and foremost, instead of making decisions based on commissions.
• Check credentials: No matter which type of advisor you choose, verify their credentials online to ensure their licensing is up-to-date and they don’t have any troubling disciplinary actions on their records.
• Ask around: Consult with your friends, family, and colleagues to land on the right advisor. You can also read online reviews of firms and individual advisors to assess their credibility.

Keep Reading: Different Types of Financial Advisor Licenses