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The Four Types of Finance Experts

If you are hoping to make smarter decisions with your finances, seeking out professional help may get you closer to your goals. Financial advisors can offer guidance on the best way to manage your money but they’re not all created equal. There are four basic types of financial experts to choose from and knowing how they differ can help you find the best fit for your situation.

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Financial Planners

Financial planners tend to offer the broadest range of services compared to other types of financial experts. They may specialize in a specific area, such as investing or estate planning, or offer general advice regarding every aspect of your finances. Some only prepare plans but others may sell annuities, stocks, bonds, insurance or similar financial products.

In terms of licensing and certification, there are no specific standards for financial planners. Stockbrokers, insurance agents, investment advisors and accountants can all offer financial planning services but a background in finance isn’t a prerequisite. The Certified Financial Planner Board of Standards offers professional certification but it’s not required to be a financial planner.

The fee structure for a financial planner typically depends on the types of services they offer. You may be charged an hourly rate, a flat rate or a commission. The amount of the commission is usually based on the value of the products the financial planner is selling. Flat rate fees may be calculated based on the services offered or as a percentage of the assets involved.

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Registered Representatives

Registered representatives are licensed to buy and sell investment products, including stocks, bonds and mutual funds. They’re commonly referred to as stockbrokers but they may also be called investment consultants or general securities representatives.

The type of products registered representatives can sell is determined by the type of license they have. Someone who holds a Series 6 license is limited to mutual funds, variable annuities and similar products but a broker with a Series 7 license can sell a wider range of securities.

To obtain licensure as a registered representative, you must pass the Series 7 and Series 63 securities exams and be licensed by your state securities agency. You also have to work for a company that’s a member of the Financial Industry Regulatory Authority (FINRA) or a self-regulatory organization. Registered representatives are typically paid on a commission-only basis.

Registered Investment Advisors

If you’re looking for personalized investment advice or you want help managing your portfolio, you may want to consider hiring a registered investment advisor or RIA. These individuals manage assets on their clients’ behalf but they can’t actively buy or sell securities unless they hold a securities license.

Individuals or securities firms can be registered as investment advisors and both are subject to regulation by the the U.S. Securities and Exchange Commission or their state securities agency, depending on the value of the assets they manage. They must also adhere to certain fiduciary principles and are generally held to a much higher ethical and professional standard than registered representatives. Investment advisors can be paid on commission or charge an hourly fee or a flat rate.

Money Managers

Money managers perform the same types of services as a registered investment advisor but with one key difference. In addition to offering guidance and advice, money managers are authorized to make investment decisions on behalf of their clients without getting their approval first. They have a fiduciary responsibility to choose appropriate investments and manage them accordingly based on their client’s preferences.

Money managers typically work exclusively with individuals who have substantial investment portfolios. Rather than charge a fee or a commission, money managers are paid based on a percentage of the assets they manage. In terms of regulation and oversight, they’re subject to the same standards as registered investment advisors.

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Whether you’ve got a little or a lot, knowing how to make the most of your money is key to achieving your financial goals. Having the right finance expert on your side can make a huge difference in how well you succeed.

Photo Credit: WestInteractive

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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