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What Is A Financial Advisor?

A financial consultant or financial advisor is someone who gives professional financial advice to clients according to their individual financial situation. In most countries, financial advisers must first complete certain training and obtain registration with a regulatory board in order to give professional advice. In the United States, the Financial Advisors Association is the professional body responsible for regulating the activities of financial advisers. Many US states also have professional licensing boards that license advisers who meet specific requirements. Financial advisers can also work as brokers providing independent advice to individual clients.

Financial Advisors

There are different types of financial advisors, including stock market investors, bond market investors, real estate professionals, asset managers, commodities, hedge funds, international investment advisors, and domestic investment advisors. The role of a financial advisor can change over time, depending upon the needs of a particular client. For example, a mortgage consultant can help people with the process of refinancing their mortgages. On the other hand, an energy consultant can assist homeowners who are interested in improving their homes’ energy efficiency.

Professional financial advisors can also be attorneys, brokers, stockbrokers, and insurance professionals. While stockbrokers do not provide actual monetary services, they help their clients manage their investments, by providing investment advice and market data. Attorneys can give legal advice and engage in specific practices such as estate planning and probate. Insurance professionals can be responsible for various aspects of personal insurance, including annuities, whole life, variable life, and employer provided insurance. Finally, equity or wealth managers can be involved in a variety of aspects of directing portfolios or creating individual investment strategies for their clients.

The suitability standard of the US Department of Education for financial advisors was established in 1982 to protect consumers from fraudulent and incompetent advice being given to them by financial advisors. The test is based on whether the advisor provides material information that would reasonably lead a reasonably competent person to conclude that the advice is reliable and would not result in a bad investment. The test does not consider whether or not the advisor has the requisite experience, knowledge, and training to assist his or her clients in making investment decisions. In order to pass this test, financial advisors need to have a high degree of skill, knowledge, and training. In order to be certified, financial advisors must pass three additional tests, including the ability to demonstrate that they have significant accounting, research, and client service skills.

There are no federal or state requirements for financial advisors to meet before being able to practice. However, most states require that financial advisors are at least registered with the state’s department of financial affairs. Many financial professionals also participate in professional organizations that are dedicated to providing high-quality financial advice to their members.

Most life insurance companies require their financial advisors to be registered or at least maintain a non-liability status with the Better Business Bureau. Financial advisors who are also life insurance brokers can also engage in fiduciary activities. Brokers are required to exercise caution when providing financial advice to their client, as they must exercise reasonable care in determining whether a client’s current needs warrant the purchase of life insurance. Life insurance is not a guaranteed product and financial advisors who take on too many risky products – such as windfalls and bonds – may not be serving their clients well.