A financial consultant or financial planner is a professional that offers financial advice to potential customers according to their individual financial circumstances. In most countries, financial planners must undergo certain training and obtain registration with a governing regulatory body to give financial advice. They are also expected to have certain qualifications, such as a bachelor’s degree with relevant courses. The first step to becoming a financial consultant or planner is to obtain the appropriate licensing or registration from a relevant regulatory body. The regulatory bodies vary slightly from one country to another.
Many professional advisors work through a limited company structure. Limited companies are generally run by the owner or owners and are not influenced by any outside forces. Many advisors choose to operate through a limited company structure because they offer a much more intimate and direct relationship with their clients. It is also a lot easier to hide the identity of the people providing financial advice, particularly if they are offering financial products for sale to the general public. Although personal financial advisors can sometimes be more difficult to locate than firms that are run through a limited company structure, they are still easier to find and locate than independent financial advisors. Larger firms can also have more sophisticated and specialized means of operation and can easily avoid having to register under the regulatory bodies that require financial planners to be licensed and registered.
There are also three differing certification tests that financial advisors are required to pass before becoming certified. These three tests are the Registered Investment Advisors (RIA) exam, The Certified Financial Planner (CFP) exam, and the International Financial Advisors (IFAS) exam. Financial planners are required to pass all three examinations in order to maintain their certification. Financial advisors can choose to become certified with one of the three organizations, RIA, CFP, or the International Financial Advisors (IFAS). The main differences between these three is that RIA requires candidates to have a higher level of education and experience in order to become certified; CFP does not; and the International Financial Advisors only requires its members to have a Bachelors degree in finance or a similar field and an international experience.
In terms of fees, both types of financial advisors can offer fee-based financial advisors services, though the services of a fee-based financial advisor are slightly more expensive than those offered by a fee-only financial advisor. A fee-only financial advisor offers his or her services to his or her clients at a fixed monthly fee. A fee-based advisor is only available to those clients who can afford to pay a monthly fee, and also requires the client to take out a loan in order for that person to be able to hire the advisor. Also, most fee-only financial advisors have a limited range of clients that they can recommend to, as compared to other financial advisors.
The main difference between the types of financial advisors is that brokers and robo-advisors are not regulated by the Securities and Exchange Commission (SEC), while financial advisors are regulated by the Department of Education, Office of the Secretary of Education. Brokers are registered with the SEC, while advisors are not formally registered, but can be found on the internet, in newspapers, or on business cards. Furthermore, these types of advisors do not require licensing, as well.
Many people believe that the term wealth management refers to wealth enhancement or planning. However, the term is also commonly used to refer to financial planning or retirement management, depending upon the situation. Therefore, some people refer to all three as wealth management, with the addition of the term financial plan, in order to differentiate between the three. It should be noted that the term wealth management is generally used to describe all three services, and not specifically to any one area of expertise. When considering your investment strategy or in determining what type of advisor to use for your wealth management, you should keep these basic differences in mind.