Unfortunately, titles in the financial
services industry are somewhat of a free-for-all. Anybody can call themselves a
Financial Planner, Wealth Manager, Financial Advisor, Financial Consultant, and
so on—even if they don’t really provide the advice (in your best interest) that
those titles imply. This is a regulatory problem…the legislation is in place,
we just need regulators with spine to get really clear on the appropriate use
of titles and then to enforce it.
This will step on a few toes, but here
An Insurance Broker sells the insurance policies of many different
insurers. Sometimes “broker” and “agent” are used interchangeably in the
insurance world, but “agent” often refers to a person who sells the insurance
products of one company. Technically,
an insurance agent owes a duty of loyalty to their employer that trumps any
duty of loyalty to you as customer.
An Investment Broker (called “Registered Representative”) typically
sells many different types of investment products, but can only sell those that
have been approved by his or her broker-dealer. Technically, an investment
broker owes a duty of loyalty to their employer (the broker-dealer) that trumps
any duty of loyalty to you as customer.
Advisor is a title that’s used generically
by many different types of financial professionals. Investment brokers commonly
use the title “Financial Advisor” because it sounds better, more trustworthy.
It implies advice like that you’d receive from a fiduciary, but investment
brokers are not fiduciaries (at least not in their broker capacity). It’s
perfectly understandable that the general public would think they’re getting “advice”
from an “advisor.”
An Adviser (sometimes spelled
Advisor) who provides investment and/or financial planning advice for a fee usually owns their own Registered Investment
Adviser (RIA) firm or is an Investment Advisor Representative (IAR) of such a
firm. These are the folks who, by law, are subject to a fiduciary standard
where they must place your interest (as client) above their own and fairly
manage any conflicts of interest in your favor.
Please understand…if an “advisor”
is not a fiduciary, that doesn’t make them a bad person or automatically mean
that they’ll bilk you out of your hard-earned money. The key issue is to make
sure you know what kind of financial professional you need, who you’re dealing
with, how they’re regulated and compensated, and then look beyond the titles
Hope that helps.
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.