In addition to being qualified to provide you with general financial planning services, many financial planners are also registered as investment advisers or hold insurance or securities licenses that allow them to buy or sell products. Other planners may have you use more specialized financial advisers to help you implement their recommendations. With the right education and experience, each of the following advisers could take you through the financial planning process. Ethical financial planners will refer you to one of these professionals for services that they cannot provide and disclose any referral fees they may receive in the process. Similarly, these advisers should refer you to a planner if they cannot meet your financial planning needs.
The two principal types of accountants in the United States are Certified Public Accountants (CPAs) and public accountants. CPAs have passed a national examination, completed educational and supervised experience (in most cases) requirements, and are licensed by the various states to practice public accounting (e.g., auditing) as CPAs. Generally, public accountants are accountants who were in practice at the time that most states required all new accountants to be CPAs and who were "grandfathered" by many states to practice for the rest of their lives as public accountants. Accountants perform one or more of the following services involving the use of accounting or auditing skills: issuance of reports on corporate and individual financial statements, consulting, preparation of tax returns and the provision of tax-related advice. Many accountants have broadened their activities in recent years into computer systems analysis, management advisory services, corporate or individual tax planning or other areas of financial planning, such as investment planning.
A relatively small percentage of attorneys provide financial planning services, usually specializing in estate and tax planning. In the context of financial planning, a planner may ask an attorney to provide specific legal advice for a client, particularly in the areas of taxation or estate planning. An attorney may also be called upon to prepare the legal documents necessary to implement recommendations in areas such as wills, trust documents or business ownership planning.
Broker/dealer is a term used to describe an individual or a company that is licensed to buy and sell investment products for or to clients. Some broker/dealers are large companies that sell securities that they own (thus, the term "dealer"), while others are firms that only buy and sell securities on behalf of investors (thus, the term "broker"). To be in the securities business, an individual or a company must be a broker/dealer or an individual must be affiliated with a broker/dealer as a registered representative.
CERTIFIED FINANCIAL PLANNER™ Certificant or CFP® Practitioner
CERTIFIED FINANCIAL PLANNER™ certificants are individuals who have met CFP Board’s education, examination and experience requirements, have agreed to adhere to high standards of ethical conduct and who complete CFP Board’s certification requirements, including continuing education, to use the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and . A CFP® practitioner is a financial professional authorized to use the CFP® certification marks who has identified himself or herself to CFP Board as being actively engaged in providing financial planning services. All CFP® certificants have voluntarily submitted to the regulatory authority of CFP Board.
CHARTERED FINANCIAL ANALYST®
Holders of the Chartered Financial Analyst® (CFA®) designation are securities analysts, money managers and investment advisers who have completed the CFA program, a graduate-level, self-study curriculum and examination program for investment professionals that covers a broad range of investment topics. CFA charterholders are required to affirm their commitment to high ethical standards and voluntarily submit to the authority of CFA Institute.
CHARTERED FINANCIAL CONSULTANT
The title Chartered Financial Consultant (ChFC) is used by financial professionals-including accountants, attorneys, bankers, insurance agents and brokers, and securities representatives-who have earned the ChFC designation by completing The American College’s eight-course education program, met experience requirements and agreed to uphold a code of ethics.
ESTATE PLANNING PROFESSIONAL
An estate planning professional devises a plan for the orderly handling, disposition and administration of an individual’s assets (which can include securities, insurance, real estate, cash and business interests) at the time of the individual’s death. Estate planning professionals, usually individuals who practice accounting, financial planning, insurance, law or trust banking, also make financial projections or illustrate financial options and strategies for a client. As many estate planning documents can only be completed by an attorney, estate planning professionals often work as part of a team that includes an attorney.
FEE-BASED FINANCIAL ADVISER
An adviser who is compensated both by fees paid by the client and commissions that are contingent on the purchase or sale of financial products.
FEE-ONLY FINANCIAL ADVISER
An adviser who is compensated solely by the client, with neither the adviser nor any related party receiving compensation that is contingent on the purchase or sale of financial products.
FINANCIAL ADVISER (or ADVISOR or COUNSELOR or CONSULTANT)
Financial adviser (or advisor) is a generic term used broadly by consumers and financial services professionals to describe an individual engaged in providing financial advice, services or products to a client for compensation. The term "financial adviser" covers a broad spectrum of financial professionals including financial planners, registered representatives, money managers, investment advisers and individuals who sell, or advise people on, financial products.
FINANCIAL (SECURITIES) ANALYST
These professionals are usually employed by investment brokers, banks, mutual fund managers, venture capitalists or investment institutions to conduct investment research and analyze the value of securities and financial condition of a company, group of companies or industry sector. Based on their analysis of a given stock or market sector, analysts will make investment recommendations to buy, sell or hold a given stock.
Insurance agents are individuals licensed by a state or states to sell life and health and/or property and casualty insurance products. Many financial planners are licensed to sell or give advice on insurance products. Other financial planners might identify insurance needs for a client, but turn to a licensed insurance agent for recommendations about which existing insurance products best meet the client’s needs. Independent insurance agents sell products for two or more insurance companies, exclusive insurance agents represent only one.
Any individual or firm providing securities advice for compensation as part of a regular business of giving investment advice must register with the Securities and Exchange Commission (SEC) or appropriate state securities agencies as an investment adviser, unless specifically exempted from registration. Financial firms and individuals managing $25 million or more of assets have to register with the SEC, while individual advisers and firms managing less than $25 million have to register with the state securities agency in the state(s) in which they practice. Individual advisers whose place of business is in Wyoming (which does not currently regulate individual advisers) must register with the SEC. Individual advisers with less than $25 million under management but who have clients in more than 30 states also may register with the SEC. Broker/dealers are usually exempt from registering as investment advisers because they are primarily sales agents who fall under the regulation of FINRA (formerly NASD).
Investment advisers may recommend stocks, bonds, mutual funds, partnerships or other SEC-registered investments for clients. To register, an applicant must file a Form ADV (Adviser) detailing educational and professional experience with either the SEC or the state(s), and disclose whether he or she has ever been the subject of disciplinary action. This form or its equivalent must be shown to potential clients prior to the commencement of a professional engagement.
INVESTMENT ADVISER REPRESENTATIVE
An investment adviser representative is an individual associated with an investment adviser firm who provides investment advice to clients. States currently use the Series 65 exam to test investment adviser representatives. The North American Securities Administrators Association’s (NASAA) revised Series 65 exam tests the subject matter knowledge and competency of state-registered investment adviser representatives, and must be passed as a licensing requirement. Individuals associated with an investment adviser firm who do not communicate directly with clients (e.g., personnel who prepare newsletters, provide general market timing advice or prepare lists of recommended purchases for Web sites) may not be deemed investment adviser representatives based on certain state laws.
Although investment consultant is a generic term used to describe a money manager or even a financial planner, it more accurately describes consultants who evaluate, select and monitor money managers. Consultants typically work for brokerage firms or independent advisory firms, and their clients most often are institutional investors, such as pension plans, but may include individuals with substantial sums to invest.
Money managers typically design a portfolio for clients (or work with a design developed by a financial planner) comprising individual securities, bonds, real estate or other financial assets and investments, and manage the portfolio on a discretionary basis, usually for a fee that is a small percentage of the value of the assets under management. Money managers may range from an independent advisory firm to a bank trust department, pension fund, mutual fund or insurance company.
PERSONAL FINANCIAL SPECIALIST
Certified Public Accountants (CPAs) who wish to specialize in personal financial planning can earn the American Institute of Certified Public Accountant’s (AICPA) Personal Financial Specialist (PFS) designation by being a member of the AICPA in good standing and meeting its exam, experience, and learning requirements.
See money manager above. The term portfolio manager is often used to describe the investment manager of a mutual fund or private institutional fund.
REAL ESTATE BROKER
A real estate broker is licensed by the state(s) in which he or she practices to arrange the purchase or sale of property for a buyer or seller in return for a commission. A real estate agent is an individual who works for a real estate broker and may hold an individual real estate broker’s license. Real estate brokers may help consumers finance a real estate purchase through their contacts with banks, savings and loans, and mortgage bankers.
A registered representative, also called a stockbroker, is affiliated with a stock exchange member broker/dealer firm, recommends to clients which securities to buy and sell, and earns a commission on all trades as compensation. To become a registered representative, an individual must pass FINRA-administered securities exams depending on the type of securities in which he or she wishes to deal (e.g., Series 6 for variable annuities and mutual funds, Series 7 for general securities) and any securities exam(s) required by the state securities agency of any state in which he or she practices. All registered representatives, including any financial planners who execute buy or sell orders for mutual funds, stocks, bonds, commodities or other securities on behalf of clients for compensation, must be registered with Financial Industry Regulatory Authority (FINRA), formerly known as NASD, and licensed by the appropriate state securities agency.
Note: Investment advisers who only manage money in a no-load mutual fund for a percentage of assets (a fee) are not required to register with Financial Industry Regulatory Authority (FINRA), formerly known as NASD, or be licensed by the appropriate state securities agencies as they do not execute securities transactions on behalf of their clients. These trades are executed instead by the broker/dealer custodian of the clients’ funds.