Whether you’re learning to invest or wondering if you have enough to purchase a house or retire, a financial adviser can help. These professionals can provide personalized investing or savings advice, share tax insights or help you make an estate plan. There isn’t a one-size-fits-all financial adviser. Instead, you should consider your goals, the amount you have to spend and the advice you’re seeking to choose the best financial adviser. Read on to learn about nine types of financial advisers, from robo-advisers to CFPs to tax advisers.
Understanding How Financial Advisers Work
The role of a financial adviser is to offer expertise and guidance on how to save, invest or manage your money to reach financial goals. The services they provide can be far-reaching, from budgeting or tax advice to investment strategies and estate planning. Financial advisers will want a complete picture of your assets, liabilities, income and expenses to build a strategy of steps for your goals.
Some financial advisers have expertise in one area or focus on specific advice. These can include divorce financial advisers or millennial-focused financial advisers. Others specialize in estate planning or work as wealth managers to grow your wealth. Which adviser best suits your needs depends on current assets, financial goals and values.
What Types of Financial Advisers Are There?
If you count sub-specializations, there could be many more financial advisers than the nine listed here. However, these nine common types of financial advisers help clients with a wide range of financial goals and offer unique specializations. Here are nine types of financial advisers who could help you reach your goals.
1. Certified Financial Planner (CFP)
CFPs have completed extensive training and education in various financial planning areas. They help clients create comprehensive financial plans, including retirement planning, investment management, tax planning and estate planning.
2. Registered Investment Adviser (RIA)
RIAs are professionals or firms that provide personalized investment advice and manage investment portfolios for clients. They must register with the U.S. Securities and Exchange Commission (SEC) or state securities authorities.
3. Wealth Manager
Wealth managers specialize in providing holistic financial services to high-net-worth individuals. They offer comprehensive solutions, including investment management, estate planning, tax planning and risk management.
4. Financial Consultant
Financial consultants typically work for financial institutions and provide advice on various financial products and services, such as insurance policies, mutual funds and retirement plans. They may be required to promote specific products or services offered by their firm and generally do not offer comprehensive financial planning.
5. Robo-Adviser
Robo-advisers are online platforms that use algorithms to provide automated investment advice. They typically have low fees and offer diversified portfolios based on a client's risk tolerance and financial goals. Robo advisers are a simple starting point for low-fee investment advice and planning.
6. Insurance Agent
Insurance agents specialize in selling insurance policies, such as life insurance, health insurance and property insurance. While they may offer some financial advice, their primary focus is on insurance products. Insurance agents are essentially salespeople who earn commissions on each sale. Weigh and research insurance options before choosing to work with a specific insurance agent.
7. Retirement Planner
Retirement planners focus on helping individuals plan for their retirement. They analyze income sources, estimate expenses and develop strategies to ensure a comfortable retirement. They create projections and spreadsheets based on income and expenses to build a retirement solution that meets your lifestyle and income expectations.
8. Estate Planner
Estate planners specialize in helping clients create estate plans and manage their assets to ensure the smooth transfer of wealth to beneficiaries after their death. They may also assist with minimizing estate taxes and creating strategies to maximize inherited wealth.
9. Tax Adviser
Tax advisers provide expertise in tax planning and help clients optimize their tax strategies. They assist with tax compliance, finding deductions and developing tax-efficient investment strategies. Certified Public Accountants (CPAs) often work as tax advisers, offering tax preparation and optimization advice.
How to Choose the Right Type of Financial adviser
Choosing the right financial adviser depends primarily on financial goals. Beyond that, you’ll want to compare professionals’ qualifications, history, experience, reviews and references to choose the best match for your financial situation.
1. Determine Your Financial Needs and Goals
Before selecting a financial adviser, take some time to assess your financial situation and define your goals. Are you looking for assistance with retirement planning, investment management, tax planning or a combination of services? Understanding your specific needs will help you identify the type of adviser who can best meet them.
2. Check Credentials and Certifications
Look for financial advisers who hold relevant certifications and credentials. Look for qualifications such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Personal Financial Specialist (PFS), Certified Public Accountants (CPA) or other credentials. Then, check for their registration with professional organizations. You can also ask about degrees in finance, accounting or business.
3. Understand the Adviser's Fiduciary Duty
Some financial advisers are held to a fiduciary standard, which means they must act in the best interest of their clients. This requirement differs from the suitability standard, which requires advisers to recommend products suitable for their client's needs but may not necessarily be the best option. Check the types of financial advisers' fiduciary responsibility before working with a professional and consider working with a fiduciary adviser to ensure they prioritize your interests.
4. Research the Adviser's Experience and Track Record
Look for advisers with a proven track record of success and experience in managing situations similar to yours. Consider factors such as their length of time in the industry, their client base and any relevant testimonials or reviews.
5. Evaluate the Fee Structure
Financial advisers charge fees for their services, which can vary depending on the type of adviser and the services provided. Some advisers charge a percentage of assets under management, while others may charge hourly or flat retainer fees. Make sure you understand the fee structure and assess whether it fits with your budget and aligns with the value you expect to receive.
Using Different Types of Financial Advisers
Remember that choosing a financial adviser doesn’t have to be a long-term commitment. You can choose to use different types of financial advisers for different situations and goals. For example, you might choose to work with an insurance agent, a tax adviser and a retirement planner. Or, a CFP might be able to combine several of these roles for you.
Everyone goes through many experiences and financial situations in their lifetime. Finding and accessing the right financial professionals to reach your goals can help you create financial freedom, no matter what life throws your way. Learn more about the difference between a CPA and CFP or find some of the best financial advisers here.
Frequently Asked Questions
What are the three main types of financial advisers?
Several kinds of financial advisers are available, including the nine options above. Some investors consider the types of financial advisers to be traditional financial advisers, robo-advisers and online financial planning services. However, you have many sub-specialties within these categories, including divorce financial planning services and Christian financial advisers.
What type of financial adviser is the best?
The best type of financial adviser will depend on your financial situation and goals. Consult the list in this article for some of the best financial advisers by goals.
How do I know what type of financial adviser I need?
The type of financial adviser you need will have experience helping clients with similar financial portfolios and goals ro create realistic financial plans. For example, certified financial planners work with people of all different income levels, while wealth managers generally only work for high net-worth individuals.
About Alison Plaut
Alison Plaut is a personal finance writer with a sustainable MBA, passionate about helping people learn more about financial basics for wealth building and financial freedom. She has more than 17 years of writing experience, focused on real estate and mortgage, business, personal finance, and investing. Her work has been published in The Motley Fool, MoneyLion, and she is a regular contributor for Benzinga.