Types of Financial Advisors

True Tamplin, BSc, CEPF®

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 14, 2024

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What Is a Financial Advisor?

A financial advisor is a professional who helps individuals and businesses manage their finances wisely.

They do this by planning short- and long-term financial objectives with their clients and suggesting strategies to achieve them.

Financial advisors differ depending on their training, experience, or certification.

They may work as independent consultants, be affiliated with an investment firm (such as a mutual fund or brokerage), or be an employee of a financial services company.

When searching for a financial advisor, it is essential to understand the type of service you are looking for to help you select someone who meets your needs.

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Types of Financial Advisors

Various types of financial advisors can specialize in different areas simultaneously.

They may hold one or more of the titles listed below:

Financial Risk Manager

A financial risk manager helps companies, governments, and organizations identify and assess potential risks affecting their finances.

They also develop strategies to minimize the effects of such risks.

Financial risk managers are generally well-versed in various fields, including economics, accounting, finance, law, and taxation.

They typically do not cater to individual clients.

Investment Advisor

An investment advisor helps individuals or companies make decisions about their investments.

They might work with financial instruments such as stocks, bonds, mutual funds, real estate, insurance products, commodities, or derivatives.

They begin by analyzing financial markets then they make recommendations based on their research.

They can provide advice on how to invest money, what types of investments are best suited for a particular situation, and how to manage risk to make the most effective use of funds.

Broker-Dealer and Broker

A broker helps clients buy and sell securities.

They can execute trades on behalf of their clients and offer advice on investments, retirement planning, taxes, estate planning, insurance, and other areas of personal finance.

In contrast, a broker-dealer is an individual or company that can also buy and sell securities on behalf of their clients.

However, they also routinely perform these same activities for themselves.

Personal Finance Specialist (PFS)

PFS is an additional certification acquired by Certified Public Accountants (CPAs) who also wish to offer financial planning services.

A personal finance specialist combines extensive tax knowledge and financial planning expertise to help clients plan for their goals.

They take the time to understand a client’s unique situation so they can tailor a financial plan to best serve their needs.

They might also help clients manage investments, save for retirement, create a budget, save for college tuition, and prepare for the distribution of their estate.

Registered Representative

Registered Representative is the formal name for what used to be known as stockbrokers.

They may work for major investment firms or be independent brokers and are typically paid through commissions.

Their job includes analyzing financial markets, keeping updated on economic news, and recommending investments based on an individual’s risk tolerance, portfolio objectives, and overall financial goals.

Certified Financial Planner (CFP)

CFP is a designation awarded to financial advisors who have met the education, experience, and examination requirements of the Certified Financial Planner Board of Standards.

CFPs must adhere to a fiduciary standard and always act in their client's best interests.

They offer comprehensive planning services and they advise on almost every aspect of their client's finances, including investments, retirement, taxes, estate, insurance, and education planning.

Some CFPs sell financial products, while some are also brokers.

Chartered Financial Consultant (ChFC)

ChFC is a professional credential offered by the American College of Financial Services to financial advisors who meet specific educational and experience requirements and pass a comprehensive exam.

It is known as a popular alternative to the CFP designation. As such, ChFCs can also give clients an unbiased assessment of their financial situation and offer advice on planning for long-term financial stability.

The main distinction between CFP and ChFC is coursework requirement.

Chartered Financial Analyst (CFA)

CFA is a professional designation awarded by the CFA Institute to candidates who can complete examination requirements and gain at least four years of work experience in investment decision-making.

This credential indicates that an advisor specializes in financial analysis and portfolio management. CFAs often fill analytical roles in investment firms, insurance companies, or banks.

Chartered Life Underwriter (CLU)

CLU is a professional designation given to advisors by the American College of Financial Services. CLUs are specialists in life and health insurance planning.

They are also knowledgeable about estate planning and planning for business owners.

They can also take up elective courses on the fundamentals of financial planning, income taxation, investments and retirement planning.

Chartered Mutual Fund Counselor (CMFC)

CMFC is a designation previously granted by the College for Financial Planning.

Although this credential is no longer given to new applicants, the issuing organization still supports previous designees.

CMFCs specialize in mutual funds. With their expertise, they assess clients’ needs, recommend the most appropriate investments, and suggest a personalized plan for achieving financial goals.

Certified Public Accountant (CPA)

CPAs are financial professionals who have earned a CPA license granted by their state’s Board of Accountancy.

They attained this designation after passing the Uniform Certified Public Accountant Examination and meeting other state requirements.

CPAs provide accounting-related services, such as preparing tax returns, bookkeeping, or auditing a business’ financial records.

They also give financial advice on taxes, investments, business organization, and other financial planning topics.

Financial Coach

Financial coaches do not manage investments or provide tax advice like other types of financial advisors.

They are more focused on providing education, guidance, and support to help clients understand their finances and develop better habits.

Financial coaches help clients create customized financial plans to meet their future goals.

They also work to improve a client’s relationship with money by assisting them to identify destructive habits and develop more positive perspectives towards it.

Enrolled Agent (EA)

An enrolled agent is a financial advisor who is a tax expert. EAs are federally licensed tax practitioners who have passed the Special Enrollment Examination by the Internal Revenue Service (IRS).

As such, they can represent people and businesses before all administrative levels of the IRS.

EAs are knowledgeable in areas of tax law such as individual and business taxation, wealth transfers, estate planning, probate taxes, and more.

They can understand complex tax issues and represent clients during both audit examinations and appeals.

Portfolio, Investment, and Asset Manager

Portfolio Managers, Investment Managers, or Asset Managers are similar titles some financial advisors hold.

These indicate professionals who specialize in managing and creating investment portfolios.

They support clients through the entire investment process, from researching and selecting individual stocks, bonds, or other securities to implementing the appropriate strategies that fit the client’s goals.

Wealth Manager

Wealth managers are a type of financial advisor specializing in providing comprehensive services to high-net-worth individuals.

They typically help with estate planning, tax strategies, investments, and asset protection.

While all wealth managers will have background knowledge in these areas, some may specialize in particular topics such as tax planning or retirement income strategies.

They have access to a broad range of resources that allow them to provide personalized advice.


Robo-Advisors are automated financial advisors that provide advice through computer algorithms.

They use modern technology to deliver sophisticated portfolio management services at a fraction of the cost of human advisors.

They begin by creating custom portfolios based on individual goals, risk tolerance, and time horizon.

These portfolios are regularly monitored and rebalanced as market conditions change.

Robo-Advisors may also provide online planning tools as an additional service.

Financial Therapist

Financial therapists are a special type of financial advisor focusing on the psychological aspects of money management.

They are trained to help clients understand how their relationship with money impacts their overall life goals and behavior.

They begin by identifying areas where clients may struggle financially, such as dealing with debt or managing investment decisions.

Then they equip their clients with the tools to manage their money in a way conducive to their long-term financial goals.


Considerations When Choosing a Financial Advisor

To ensure that your finances are in good hands, consider the following factors before choosing a financial advisor:

Services Offered

You should understand the services a potential financial advisor offers and match them with what you need based on your financial situation and goals.

Most financial advisors provide some form of investment management or portfolio management service.

Other services offered vary from advisor to advisor but may include retirement planning, budgeting, cash flow management, tax planning, estate planning, charitable or legacy planning, and insurance evaluation.

Fiduciary Status

Financial advisors registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) must abide by fiduciary standards when advising their clients.

Fiduciaries are legally bound to act in their client’s best interest when providing advice and managing investments.

They are also expected to disclose any potential conflicts of interest due to their services.

However, not all financial advisors are fiduciaries.

Some only abide by the suitability standard, meaning their product recommendations must only be suitable to their clients, not necessarily best for their interests.

Client Type

Financial advisors serve various clients, ranging from individuals and families to large businesses. T

hey also work with all income strata, from those with little to invest to high-net-worth clients.

Knowing the typical clients of a potential financial advisor can help you decide if they are a good fit for your needs.

For example, an advisor who primarily works with businesses may not be the most suitable to advise individuals and vice versa.

Fee Structure

The most common type of fee structure for financial advisors is an hourly rate or a flat fee.

Other financial advisors may charge clients a percentage of the total assets under management (AUM), while others still receive commissions from selling certain financial products.

The fees vary greatly and depend on the scope of services provided. It is essential to understand what you are paying for and the value being provided in return.

Compare fees between different advisors and ask questions about the services included in their fee structure.

Disciplinary Records

It is important to check the background of a potential financial advisor.

You have to know their experience and education and whether they have had any disciplinary action taken against them.

After all, you are going to entrust them with your hard-earned money.

You may use the SEC Action Lookup - Individuals (SALI) tool or the Investment Adviser Public Disclosure (IAPD) website to check the disciplinary records of potential advisors.

You may also check FINRA's BrokerCheck feature and other local state regulatory websites.

Certifications Obtained

Financial advisors must obtain specific certifications and licenses to practice.

These typically require taking courses and passing exams covering topics like portfolio management, retirement planning, financial statement analysis, and taxation.

Certifications ensure that the financial advisor has the knowledge and expertise necessary to give sound advice.

They can provide peace of mind that you are working with an expert. They also help protect your assets from any potential risks associated with unlicensed advisors.


How to Become a Financial Advisor

1. The first step to becoming a financial advisor is attaining a bachelor's degree in finance, economics, accounting, or a related field.

2. You can then obtain the necessary licenses and certifications focused on your preferred specialization.

3. For instance, you may also pursue the CFP certification if you wish to focus on financial planning or the CFA designation if you enjoy investment analysis.

4. Once you are licensed, you can register with FINRA before finding a job with an established firm or starting your own practice as an independent financial advisor.

5. Joining organizations like the National Association of Personal Financial Advisors (NAPFA) can help grow your network and, eventually, your business too.

Cost of Hiring a Financial Advisor

Financial advisor costs vary depending on the type of advice needed, the services offered, and the advisor’s experience level.

Financial advisors may charge an hourly rate, a flat fee, or a percentage based on assets managed.

Hourly rates typically range from $200-$400 per hour and are often used when providing one-time consultation services such as reviewing retirement plans or creating financial goals.

Flat fees vary widely depending on the nature of work but usually range from $1,000 to $3,000.

These are often used for comprehensive services such as developing investment portfolios or estate planning.

Some advisors charge assets under management fees ranging from 0.5% to 2%, while others earn a commission for selling investment products like stocks and mutual funds.

Additional fees may include an account maintenance fee, technology fees, transaction fees, and taxes.

Clients must ask their financial advisors what fees they charge before engaging their services.

Final Thoughts

A financial advisor is a general term for a professional who provides financial guidance and advice to individuals, businesses, or organizations.

There are different types of financial advisors which vary based on their services, certifications, qualifications, and expertise.

These differences can influence the type of advisor a client prefers. For instance, large financial establishments might hire financial risk managers, while high-net-worth individuals may wish to search for advisors who are experts in wealth management.

Whichever type of advisor a client needs, clients must perform due diligence to ensure that the right one is selected.

Factors like fiduciary status, disciplinary background, services offered, fee structure, client type, and qualifications may be considered when choosing a financial advisor.

An excellent financial advisor is required to act as a fiduciary and can present a clean background.

They must also have related qualifications and experience dealing with similar clients. Finally, they must offer services that match a client's price range and needs.

Types of Financial Advisors FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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