It can be confusing trying to figure out all the different types of financial professionals out there. We will try to explain some of the common job titles or occupations in the personal finance world. Outside of personal finance there are hundreds of other types of jobs in corporate finance, banking and economics.
For the purposes of this blog, we will focus on professionals that deal with ordinary people in a retail context. These are the type of people you may encounter in a business setting. If you have a financial advisor you may also recognize some of these other occupations.
Keep in mind that many of these terms are very similar or have overlapping descriptions. Furthermore, many of these terms require no qualifications. For example, anyone can call themselves a “Money Manager”. However, some of these titles do require testing and certifications from regulatory agencies and boards of standards. For example, a person has to go through rigorous ongoing certification processes to be called a CFA or Chartered Financial Analyst.
There are two types of accountants which practice in the United States. Certified Public Accountants (CPA) and public accountants are the two types of accountants. CPAs have further qualifications than regular public accountants. They have to pass a national exam, complete educational requirements, and pass supervised experience requirements, and are licensed by the respective states in which they practice. Accountants perform the following services: issuance of financial statements and reports for businesses and individuals, preparation of tax returns and financial advice, and performing auditing services. Accountants may also perform many of the same services as financial planners and investment managers due to the financial nature of their accounting services.
The majority of attorneys who provide financial planning services usually specialize in some form of estate and tax planning. Many estate planning specialists are lawyers by the nature of the services they offer. Lawyers are needed to create many estate related documents like trusts, partnership agreements, and business ownership arrangements.
The term broker-dealer or “BD” is used to describe a company who is licensed to buy and sell investment products for or to clients. Many of the large and widely referenced financial institutions act in the capacity of brokers and dealers. To be in the securities business and make transactions on behalf of other investors, an individual must be acting as a licensed Registered Representative of an affiliated Broker Dealer.
Chartered Financial Analyst (CFA)
CFA charterholders are securities analysts, money managers, or investment advisers who have completed the CFA program. This entails graduate-level curriculum and examinations covering a broad range of financial concepts. More information on Chartered Financial Analysts can be found in the Professional Designations article.
Estate planners or estate planning professionals specialize in the disposition and administration of an individual’s assets at the time following their death. The goal for estate planners is to make sure that client assets are distributed with minimal loss of value to heirs of the estate or as otherwise instructed by the client. Estate planning professionals transfer wealth by utilizing strategies such as trust accounts, insurance policies, wills, powers of attorney, and other estate planning techniques.
Fee-Based Financial Adviser
A fee based financial adviser is compensated by both fees paid by the client as well as commissions derived from the sale of certain commission based investment products.
For more information on financial adviser compensation model and how financial advisers get paid, please see (Article: How Do Financial Planners Get Paid?)
Fee-Only Financial Adviser
Fee only financial advisors are solely compensated by fees rather than commissions. Fee only financial advisors can charge an hourly fee for financial planning services or charge fees based on assets under management. Chrome Asset Management operates on a fee-only compensation model. All Denver financial planning specialists at Chrome Asset Management operate on a fee only basis and do not sell any commissionable securities or investment products.
Financial Adviser (Advisor or Consultant)
Financial advisers (also known as financial advisors or financial consultants) is a generic term to describe professionals who gives advice to clients about investing or personal finance. Not all financial advisers have the same qualifications or areas of expertise. Money managers, financial planners, and other professionals can be considered financial advisers.
To learn about the various qualifications and licenses that financial advisers obtain, please see (Article: Financial Advisor Licenses).
A financial analyst or FA is someone who analyzes securities to make buy, hold, and sell recommendations for certain companies or sectors . Financial analysts are usually employed by some type of investment bank, rating agency, mutual fund, or investment company. Detailed analysis of companies and sectors often requires some type of professional qualification such as the CFA.
An insurance agent works for the insurance company while an insurance broker works on behalf of the client and can provide policies from multiple insurance companies. Insurance professionals usually provide a combination of different insurance such as life, property, casualty, health, and disability insurance.
Investment Adviser (IA)
According to the Certified Financial Planner Board of Standards, and investment adviser is:
“Any individual or firm providing securities advice for compensation as part of a regular business of giving investment advice must register with the Securities and Exchange Commission (SEC) or appropriate state securities agencies as an investment adviser, unless specifically exempted from registration. Financial firms and individuals managing $25 million or more of assets have to register with the SEC, while individual advisers and firms managing less than $25 million have to register with the state securities agency in the state(s) in which they practice. Individual advisers whose place of business is in Wyoming (which does not currently regulate individual advisers) must register with the SEC. Individual advisers with less than $25 million under management but who have clients in more than 30 states also may register with the SEC. Broker/dealers are usually exempt from registering as investment advisers because they are primarily sales agents who fall under the regulation of FINRA (formerly NASD).
Investment advisers may recommend stocks, bonds, mutual funds, partnerships or other SEC-registered investments for clients. To register, an applicant must file a Form ADV (Adviser) detailing educational and professional experience with either the SEC or the state(s), and disclose whether he or she has ever been the subject of disciplinary action. This form or its equivalent must be shown to potential clients prior to the commencement of a professional engagement.”
It is important to keep in mind that an Investment Adviser is not the actual person who is your financial advisor, but the actual company which they work for. Your financial advisor is technically an Investment Advisor Representative(see definition below). New Form ADV Part 2 rules for 2011 require specific and separate disclosures about the investment firm (firm) as well as the actual investment advisor representative (planner).
Investment Adviser Representative (IAR)
An Investment Adviser Representative is an individual who is employed (or associated with) an Investment Adviser and provides investment advice to clients. Investment Advisor Representatives are required to pass FINRA licenses to practice as an investment advisor representative. The must pass the Series 65 exam or pass the Series 7 exam in combination with passing the Series 66 exam. Once state registration is complete, the investment adviser representative may begin giving financial advice to clients.
Money managers are individuals who direct assets for hedge funds, mutual funds, banks, pension funds, and insurance companies. It is a generic term often given to portfolio managers and asset managers. We reiterate, this is a VERY generic term. Pretty much anyone can call themselves a money manager.
Personal Financial Specialist (PFS)
Personal Financial Specialists are Certified Public Accountants who have completed additional requirements beyond the traditional CPA certification. The PFS designation is offered by the American Institute of Certified Public Accountants (AICPA) and is intended to give a CPA further knowledge of specific financial planning topics.
Real Estate Broker
A real estate broker is someone who arranges for the purchase or sale of real property for a commission. Real-estate brokers must be licensed by the state in which they practice. The license requirement is intended to ensure real estate brokers have adequate knowledge of things like home financing options, mortgages, and property values, school districts, construction, and neighborhoods.
Registered Representative (Stock Broker)
A registered representative is an individual employed (or associated with) a broker-dealer firm who buys and sells securities for clients. Registered representatives also known as registered reps or ‘stockbrokers’, must pass the Series 7 FINRA license as well as the Series 63 exam to trade securities for clients of the broker-dealer firm. The Series 7 license gives the registered representative the ability to trade equities, fixed income, and options derivatives for a variety of clients. FINRA also offers a limited version of the Series 7 exam called the Series 6. The Series 6 allows someone to trade variable annuities and mutual funds only. The Series 7 is a General Securities License and allows the rep to trade a broader range of securities than the Series 6 exam.