Larry McClanahan, Financial Advisor
@LarryMcClanahan
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 goes….
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 they use.
Hope that helps.
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