Investment Advisor and a Financial Planner
Different real-life financial scenarios such as transforming your financial assets or an investment in mutual funds and stock markets might require you to work with financial advisors. Clients most commonly choose to work with two types of financial advisors – investment advisor and financial planner. Investment advisors and financial planners both work with money, but their areas of expertise and works differ. If you are looking to work with either of these financial advisors, it is important to understand what each of them does.
Investment Advisor
An investment advisor assists the client to create a solid investment portfolio. The primary function of investment advisors is to assist their clients with the management of their investments and social securities. Investment advisors are capable of assessing your financial stability. After doing a thorough analysis of your financial stability, investment advisors will also help you determine the risk tolerance of your investment.
Investment advisors can generate a strategy specifically tailored to your goals. Investment advisors possess expertise, knowledge, and experience in evolving market patterns. However, it is recommended to consult an investment advisor if you are planning to make investments on stock markets, mutual funds, or other securities. Financial advisors can suggest the most reasonable and viable financial strategies for your investments.
Registered Investment Advisors are bound to legally operate in the best interest of the client. This is known as a fiduciary standard. Investment advisors are also registered under the United States Securities and Exchange Commission (SEC). Investment advisors are capable of earning income through two methods.
Fee-Only
The clients are charged by the advisors based on the services that they provide. In a fee-based income, the sole source of income for investment advisors are fees charged from their clients.
Fee-Based
In a fee-based income structure, investment advisors earn income by charging the clients for their services and also by earning commissions for the sale of financial products.
- Fee-based and fee-only investment advisors are bound by the law to act according to the best interests of the clients. In other words, fee-based and fee-only investment advisors are fiduciaries.
Commission Based
Investment advisors who are commission based receive commissions as they generate investment transactions from their clients.
Financial Planners
Financial planners assist their clients by strategizing and managing the financial assets of their clients for their future. The common services provided by financial planners include:
- Retirement planning
- Estate planning
- Investment planning
- Insurance planning
Financial advisors can be hold two types of certifications. They are:
- Certified Financial Planner (CFP) certification
- Chartered Financial Consultant (ChFC) certification
As the name suggests, financial advisors primarily focus on investments. Financial advisors also emphasize on creating investment portfolios.
The clients can seek the help of both investment advisors and financial planners to meet their financial goals. If you are looking to build a solid long term financial foundation, you can seek the help of a financial planner. On the other hand, an investment advisor will help you to make successful investments. This brings us to the end of our discussion on the difference between the Investment Advisor and Financial Planner
