The world of finance and investing can quickly become complicated; between ever-changing market trends, laws and regulations, and available investment options, it can be difficult to execute investment management successfully on your own. Because of this, many people will hire an experienced expert to help guide them.
Two of the most common types of advisors are financial advisors and investment advisors. As you might expect, there is a considerable amount of overlap between investment and financial advisors. However, there are still some important differences that investors should understand.
In this article, we will discuss the primary differences between an investment advisor and a financial advisor. By recognizing these differences, you will be better able to find the exact type of support you need to achieve your financial goals, no matter whether you live near Bartley Financial’s offices in Bedford, NH or Andover, MA.
What is a financial advisor?
Before comparing financial advisors and investment advisors, it is important to begin by clearly defining what each of these individuals actually do.
“Financial advisor” is a somewhat broad title that can be used to describe several different professions, some of which don’t legally require any qualifications. However, broadly speaking, the term financial advisor refers to someone who offers financial services in exchange for compensation. Services can include estate planning, tax planning, investment management, risk management, and insurance sales.
Some of these services do require special licenses or permits. For example, for a financial advisor to sell insurance products, they’ll need to pass their state’s licensing exam and commit to ongoing education.
When choosing a financial advisor, take a look at the services they offer. Based on these, you can determine if there are specific licenses or credentials they must have. If there are no qualifications that they must have, then you should start looking for what they should have.
For example, a financial planner doesn’t have to possess any qualifications. However, they can earn recognition as a Certified Financial Planner® (CFP®) or Chartered Financial Consultant (ChFC). Professionals who hold one or more of these designations have demonstrated knowledge in the field of financial planning. They have been vetted by the boards that monitor and dispense these certifications. CFP has become the preeminent designation. It is the most sought after comprehensive financial planning educational program.
Read more: 6 Reasons to Hire a Fee-Only Financial Planner
What is an investment advisor?
The term “investment advisor” is defined directly by the Securities and Exchange Commission (SEC). According to the SEC, an investment advisor is someone who is paid to either provide advice and/or issues reports about securities. This includes advice about specific securities, as well as broader advice related to asset allocation, market value/trends, and more.
Now, if your friend were to casually say, “I think you should invest in Tesla,” that would not make them an investment advisor. The key here is that investment advisors earn money in exchange for their advice and issue this advice on a regular basis.
Read more: How to Choose an Investment Advisor
So, what’s the difference between an investment advisor and a financial advisor?
Ultimately, the primary differences between these two are the specificity (and legal definition) of their role, relevant regulations, and the relationships they have with their clients.
Role
- Financial advisors – provide services or advice related to the financial services industry. This may include tax planning, estate planning, investment management, cash flow planning, and more
- Investment advisors – offer advice and services directly related to securities
Certification
- Financial advisors – not legally required to have any certifications to advertise as a financial advisor; private companies offer optional certification programs for financial planners
- Investment advisors – must pass one or more qualifying exams
Regulation
- Financial advisors – regulation depends on the specific services that the financial advisor offers
- Investment advisors – regulated by the Securities and Exchange Commission (SEC), FINRA, and generally a state board
Can financial advisors and investment advisors be the same?
Yes! In fact, financial advisors are frequently investment advisors.
In order for your financial advisor to manage your portfolio, they must be an investment advisor in possession of the requisite licenses. They must also be registered with the appropriate regulatory authorities.
Often, it’s beneficial to hire a professional who can function in both capacities. After all, your financial plan and your investment plan should work in tandem.
Remember, though, that it’s important not to automatically conflate the two types of financial professionals. When choosing an advisor, make sure you understand precisely what kind of professional you are working with and thoroughly vet their qualifications accordingly.
Financial Planning and Investment Management at Bartley Financial
Bartley Financial is built around a client-first ethos. We are as committed to exhibiting high levels of professionalism as we are to building relationships with clients built on trust and mutual respect. That’s why we only offer a transparent, fee-only compensation structure so that our clients never need to be concerned about a conflict of interest.
Bartley Financial has an experienced team of CPAs and CFPs® that help clients manage their investment portfolios, plan for retirement, strategize taxes, or execute any other initiatives in pursuit of optimum financial health and minimal financial stress.
We are experienced and dedicated financial planners and investment advisors. We have experience creating comprehensive strategies to ensure that your wealth is being leveraged to move your goals closer. We execute a core and explore investment strategy that will optimize your ability to meet your goals and live the life you desire. We will start by crystallizing your goals, in order to “Begin With the End in Mind.”
Contact us today to begin a relationship with a team of knowledgeable, trustworthy professionals who put their clients first.