Does managing your investment portfolio make you nervous? If so, you’re not alone. For many, finding a professional that fits your needs seems like a daunting task. How do you decide who is right for you?

As you’re searching for firms or individuals to manage your portfolio, you’ll probably come across the term ‘Financial Advisor’. It’s important to understand this is a generic term. It encompasses a wide range of individuals with different levels of education, experience, and expertise. Having a basic understanding of the different terms, their specialties and designations can help you determine who is right for you. We’ve compiled information about the different types of financial advisors, the required credentials and educational levels they hold.

Types of Financial Advisors
Title Description
Registered Investment Advisor (RIA)
  • A Registered Investment Advisor (RIA) is an individual or firm engaged in the investment advisory business, paid to provide advice about securities
  • Investment Advisor Representatives are the individuals who work for and give advice on behalf of registered investment advisor firms
  • RIA’s must register either with the Securities and Exchange Commission (SEC) or state securities authorities – dependent on the firm’s total Assets Under Management (AUM)
  • RIA’s have a fiduciary duty to their clients, which means they have an obligation to provide suitable investment advice and always act in their clients’ best interests
  • RIA’s are held to a higher standard of conduct than registered representatives
(Registered Representative)
  • A Broker-Dealer is a person or company that is in the business of buying and selling securities on behalf of its customers in exchange for a fee or commission
  • Individuals who work for broker-dealers – the sales personnel often referred to as ‘brokers‘ – are registered representatives
  • Individual registered representatives must register with The Financial Industry Regulatory Authority (FINRA), pass a qualifying examination, and be licensed by their state securities regulator
  • The products brokers or registered representatives can sell depends on the license they hold
  • Brokers must have reasonable belief the investment sold is suitable for you. However, Brokers are not necessarily fiduciaries
Financial Planner
  • An investment professional who helps individuals and corporations meet their long-term financial objectives by:
    • Review and analyze the client’s financial information
    • Make recommendations to achieve client goals
    • Track progress and make adjustments as needed
  • Financial planners give advice on tax planning, asset allocation, risk management, retirement and/or estate planning.
Credentials Earned
Designation Description
Charted Financial Analyst
  • The CFA credential is the most respected and recognized investment management designation in the world
  • The credential demonstrates superior competency in advanced portfolio management, financial expertise, and technical skills.
  • Demonstrate superior competence underpinned by the highest level of ethical standards
  • Administered by the CFA Institute
  • A CFA is an expert in investments and securities
  • CFA charter holders are fiduciaries
  • Education Requirements:
    • Hold a minimum of a Bachelor’s degree
    • Self-study graduate level program
    • The program requires candidates to master 10 investment topics
    • Acquire 48 months of professional work experience
    • Pass three levels of rigorous exams
Certified Financial Planner
  • A respected designation that denotes a person is a competent, professional and ethical financial planner
  • Administered by the CFP Board
  • The CFP exam tests abilities to apply financial planning knowledge to all of the following areas: financial planning process, tax planning, employee benefits, retirement planning, estate planning, investment management, and insurance
  • CFP professionals are fiduciaries
  • Education Requirements:
    • Hold a minimum of a Bachelor’s degree
    • Complete a course of study approved by the CFP board
    • Meet 6,000 hours of professional experience, or 4,000 hours of Apprenticeship
    • Pass a three-session, 10-hour exam
Certified Public Accountant
  • The CPA license is the most widely recognized certification for accountants and tax preparers
  • License gives the right to practice public accounting
  • Administered by the institute of CPAs (AICPA)
  • Give helpful advice regarding taxes and organizing investments
  • Held to highest ethical standards
  • Education Requirements:
    • Hold a minimum of a Bachelor’s degree
    • Requires 150 hours of accounting curriculum coursework
    • Requires 1 -2 years of accounting experience gained under a CPA
    • Pass four rigorous exams

Each type of advisor serves a different purpose. It’s important to understand the differences in order to determine what will work best for your financial needs. There are also many titles and designations in the financial services industry. It’s crucial to do your research in order to understand what each designation covers. Knowing this information could help you better choose the right person. Below is a quick guide to help you choose the right person for you.

Who is Right for you?
Title Description
Registered Investment Advisor
  • You want your portfolio managed on a fully discretionary basis with investment decisions made on your behalf based on your goals
    • Look for a CFA designation
  • You want to do independent research and be involved in making investment decisions
  • You want to make all buy and sell decisions for yourself
Financial Planner
  • You need help with budgeting, big financial decisions and planning for retirement
    • Look for a CFP designation
  • You want a professional to prepare and file your tax return
  • You need advice on taxes, tax planning and estate planning to reach your financial goals
    • Look for CPA designation

Hiring a financial advisor is a great way to help you decide how to manage your assets and reach your financial goals.

Look for Series 2: Top Questions to Ask a Financial Advisor