What are the different types of financial advisor? 

What are the different types of financial advisor? 

6 mins readLast updated January 17, 2023by Kate Morgan

There are many types of financial advisory services, from investment advice to asset management. We’re here to make selecting the right financial advice option as simple as possible. Read on, and discover everything you need to know about the different kinds of financial advisors.

Investment advisors

What do they offer? What don’t they offer? 

An investment advisor makes investment recommendations and conducts securities analysis for clients.

They often have discretionary authority and must uphold high standards of fiduciary responsibility at all times.

However, an investment advisor can’t buy and sell for you without discretionary investment management authority.

This must be agreed upon in advance. 

How are they regulated? What do they charge? 

Investment advisors are primarily regulated by the U.S. Securities and Exchange Commission (SEC) or by one or more state securities authorities.

Unlicensed and unregistered advisors are responsible for most investment fraud in the USA.

The cost of an investment advisor will vary, but generally speaking, 1 per cent of your income per year is considered a reasonable fee.

How this is charged to you will depend on your contract.

Certified financial planners

What do they offer? What don’t they offer? 

Certified financial planners, also called CFPs, are individuals who have received formal recognition from the Certified Financial Planner Board of Standards.

CFPs help clients manage their money, including taxes and retirement funds.

Despite a shared name, not all CFP professionals offer their clients the same types of financial planning support.

You must carefully research before hiring a CFP, finding someone who can assist in all your required areas. 

How are they regulated? What do they charge? 

CFPs are primarily regulated by the CFP qualification itself.

The qualification requires formal education, relevant work experience, demonstrated professional ethics and strong performance on the CFP exam.

The price of a CFP will vary depending on how much advice a client needs/how much time it will take to assist them, but you’ll often be looking at 1–2 per cent of the asset/assets they are helping you to manage. 

Registered representatives

What do they offer? What don’t they offer? 

A registered representative (RR) is a person working for a client-facing financial firm, representing clients who are trading investment products and securities, employed as brokers, portfolio managers or financial advisers.

There’s also such a thing as an unregistered representative. Unregistered representatives can set up meetings, extend event invitations, and contact clients — but they can’t act beyond these parameters as RRs can. 

How are they regulated? What do they charge? 

RRs are governed by suitability standards, regulated by FINRA and the SEC and required to pass licensing tests.

They will often receive a flat fee or a percentage of a transaction’s value as their commission (agreed upon in advance). 

Consultants and wealth managers

What do they offer? What don’t they offer? 

As you explore the types of financial advisor, you might find you’re looking for a financial consultant/wealth manager.

This is, broadly speaking, an investment advisor offering a few extra services. Clients share information with their consultant, and a tailored wealth management strategy is created.

Consultants typically only work with high-net-worth individuals.  

How are they regulated? What do they charge? 

The Financial Industry Regulatory Authority (FINRA) regulates consultants and wealth managers.

FINRA has a tool that explains professional designations. Using this, you will see what qualifications/standards the issuing organizations ask for.

A wealth manager typically charges a set fee, which is agreed upon at the beginning of the client-consultant working relationship. 

Brokers

What do they offer? What don’t they offer? 

A broker is an individual that acts as an intermediary between an investor and a securities exchange.

A broker can also refer to the role of a firm. Discount brokers and full-service brokers are available.

If you’re using the services of a discount broker, you’ll save money, but you won’t be guided in your trading as you would be with a full-service broker. 

How are they regulated? What do they charge? 

Brokers are registered with FINRA. A broker might be paid through fees, commissions or the securities exchange.

As mentioned, a full-service broker will be more expensive than a discount broker.

Clarify in advance with a broker how they would like to be paid, and avoid any confusion. 

Financial coaches

What do they offer? What don’t they offer? 

A financial coach is a relatively new option. It’s a term for someone who offers their experience and services to help others with their money-related concerns and queries.

Financial coaches are not licensed and may vary in terms of expertise level, taking a holistic view of financial situations.

Since they’re not regulated in the same way as other types of financial advisors, they cannot provide product guidance.  

How are they regulated? What do they charge? 

Financial coaches are not carefully regulated. Some coaches are very trustworthy, but as evidence of experience isn’t a necessity in this profession, we’d recommend doing a good amount of research before choosing a coach.

Financial coaching is sometimes offered for free to low-income families. When financial coaching is paid for, the cost can vary a great deal.

A review conducted by the National Financial Educators Council found that hourly charges ranged from $75 to $600.

Portfolio, investment and asset managers

What do they offer? What don’t they offer? 

Portfolio/investment/asset managers build and oversee a selection of assets.

They aim to maximize the value of a person’s investment portfolio over time.

These managers can benefit people already in a good financial position, seeking to expand their investments, but they don’t offer support and advice for people looking to better manage and organize their personal finances.

Like wealth managers, they tend to work with high-net-worth individuals. 

How are they regulated? What do they charge? 

Portfolio, investment and asset managers are primarily governed by two bodies — the SEC and FINRA.

They charge fees rather than commissions, which will be discussed at the beginning of a working relationship. 

Robo-advisors

What do they offer? What don’t they offer? 

Robo-advisors are digital platforms that provide automated algorithmic investment services with very little human supervision.

Robo-advisors are best suited for traditional investment advice and guidance and might not work very well for people looking for support with more complex issues.  

How are they regulated? What do they charge?  

Robo-advisors hold the same legal status as human advisors and must be registered with the SEC.

They often charge annual flat fees of less than 5 per cent per specific amount managed, though prices differ a fair amount between brands/platforms. 

Content writer

Kate Morgan

Kate has written for leading publications and blue chip companies over the last 20 years.