Updated: Oct 22, 2018
The amount of information available about the financial services industry can be overwhelming. Adding to the confusion is the term “advisor” or… “adviser.” Our industry can’t even agree on how to spell the word! I won’t bore you with the explanation of the different spellings; just know both are grammatically correct—and this is the perfect introduction to how perplexing the financial advising world can be. With that said, let’s look at the different types of financial advisors, er… advisers out there.
Our industry hasn’t done the public any favors because unlike doctors, accountants, and attorneys, there’s not a standard that clearly defines different titles. If you’ve had interactions with financial services professionals (another loose term we can discuss later), here are some of the titles you may have seen:
· Financial Advisor
· Financial Adviser
· Vice President
· Financial Planner
· Financial Professional
· Financial Consultant
· Wealth Manager
· Financial Services Representative
· Investment Advisor
Before you even begin to understand the financial jargon, you first have to determine which of these people are best suited to help you reach your financial goals!
The good news is, we can quickly eliminate some confusion if we look at the licenses and registrations someone holds and the affiliations that they have. When we simplify it, there are only two ways that people in our industry operate.
The first way is as a registered representative associated with a broker dealer (you are likely familiar with broker dealers such as Merrill Lynch, Morgan Stanley, UBS, Wells Fargo). If you look at their business card or the disclosures on their website, you will see this affiliation. By law, he or she is representing the broker dealer in any transaction. Their legal obligation is to their company based on the employment agreement they signed. If the insert title from above list is acting on behalf of their employer, then they can’t also act in your best interest. The best you are going to get is recommendations that are suitable as defined by their employer.
The second way to serve clients is as a fiduciary professional. Simply put, a fiduciary is required to put their client's interests above their own. These professionals, just like lawyers and doctors, have to put your needs ahead of the organization they work for.
In my experience, most people would agree that they want advice from someone who has their best interest in mind. I have also found that most people believe that they are receiving advice from a fiduciary when often they are not. At Spartan Planning Group, we are a fee-only, full-time fiduciary which makes us part of just 2% of the advisory firms in the marketplace today. We always sit on the same side of the table as our clients. This means our clients have confidence they are getting advice that takes their specific needs into account without the influence of other parties.
Next time you meet a financial advisor or adviser, make sure and find out what guides their recommendations. Ask them, “Do you work to the fiduciary standard at all times?” Find out if they are registered representatives who are obligated to meet the requirements of an employer. Or if they serve their clients as full-time fiduciaries committed to doing what’s best for you above all else.