If you’re seeking financial advice, you should be aware of the types of financial advisors that exist. This is particularly true because the financial advisory world is full of different terms for financial advisors – which may make a search bewildering. What’s the difference between a financial planner, for example, and an investment advisor or a wealth manager? What’s the difference between these terms and a broker? Are they just different ways of referring to the same thing? Or are there major differences in what they do?

Looking for a financial advisor in St. Louis? Check out our guide!

While there is overlap between these terms, there are also differences that you should know about. 

Here’s a brief overview of the types of financial advisors.

Financial Planners/Financial Advisors

The term “financial planner” or “financial advisor” usually means that the person offers comprehensive financial advice in several categories. They elicit both your short- and long-term financial goals and create flexible strategies to reach those goals.

Financial planners/advisors offer a broad range of services, including cash flow management (income and expenses), investment advice, retirement planning, education planning for your children/grandchildren, risk management (insurance), and estate planning (wills/trusts, powers of attorney).

Financial planners/advisors provide investment advice on multiple asset classes and work with your investment and retirement portfolios.

Some financial planners/advisors are fiduciaries, which means they must place your financial best interests before their own. Others are not fiduciaries. 

The best-known designation for financial planners/financial advisors is the CERTIFIED FINANCIAL PLANNER™Professional. CFP®s are required to take comprehensive, detailed coursework in all aspects of financial planning and to have extensive working experience. They also must be fiduciaries.

Wealth Managers

Wealth managers do much of the same comprehensive financial planning as financial planners/advisors do. They also work according to specific short- and long-term goals and advise on various aspects of your financial life, including cash flow management, investment portfolios, retirement planning, education planning, risk management, and estate planning.

There is a difference between the two terms, however. The use of the term “wealth manager” usually signifies that the person works with high-net-worth individuals possessing substantial assets.

As such, they may also work more extensively with issues that highly affluent individuals are likely to have, such as charitable giving and philanthropic planning. Their work with estate planning may also reflect the greater wealth and complexity involved, such as sophisticated tax strategies or the use of trusts. 

The investment and retirement portfolio recommendations may also be more wide-ranging, with more asset classes than the stocks, bonds, and cash that financial planners/advisors usually work with. They may, for instance, offer more exclusive options as well as alternatives such as precious metals, currencies, and commodities.

Like financial planners/advisors, wealth managers can be fiduciaries or not. Many are CFP®s.

Investment Advisors

Investment advisors, as the term implies, generally handle only investment portfolios. They work with your short- and long-term goals, assets, and risk tolerance, focusing on tailoring general and retirement portfolios to your needs. They will advise you on asset classes according to your goals. 

Investment advisors often work for a large brokerage firm or a Registered Investment Advisor (RIA) with extensive assets under management. If they do, they are known as Investment Advisor Representatives (IARs). They may also be Chartered Financial Analysts (CFAs), which means they have taken multiple rigorous examinations on investments and have at least four years of experience.  CFAs often function as money managers.

RIAs, IARs, and CFAs must be fiduciaries. 

Stock Brokers

Stock brokers work for brokerages, which are firms that trade stocks, bonds, and other assets. Stockbrokers also work with your goals and provide investment advice. They may advise you on portfolios for both investments and retirement. Some stock brokers may handle additional financial needs, such as insurance, by advising on and selling insurance.

Although stock brokers can provide investment and risk management advice, they generally don’t provide the comprehensive financial planning services that financial planners/financial advisors do. Rarely do they provide cash management, education planning, or estate planning advice.

In addition, most are not fiduciaries. Instead, brokers must follow a suitability standard in dealing with their clients. This means that they must provide advice that is suitable for your goals and situation. If you want to retire in 10 years, for instance, a broker’s advice must be in accordance with that goal.

But, unlike fiduciaries, brokers do not have to place your financial best interests before their own. In some situations, then, brokers could advise you on a suitable investment that also prioritizes their own commissions for buying or selling stocks, bonds, cash accounts, or insurance products. A fiduciary, even if they work on commission, could not prioritize it over your best interests.

Robo-Advisors

If you’ve been looking for financial advice, you may have come across the term “robo-advisor.” What does it mean?

A robo-advisor is a brokerage firm service that is automated. You provide information about your goals, timing, and risk tolerance and it will generate a portfolio to meet your goals. It will also review the portfolio’s performance and rebalance as necessary (which all the advisors above will do as well). The primary difference is that you generally won’t meet with a person to discuss your goals or changes to your goals. You won’t have someone to bounce your questions off of or to provide you with strategic recommendations.  Comprehensive financial advice is also not available through robo-advisors. 

Trinity Wealth Advisors: CFP®s in St. Louis, Missouri

If you’re looking for financial advisors who serve affluent individuals, the partners at Trinity Wealth Advisors are happy to talk to you. We are an integrated team of CFP®s with an average of 25+ years of experience. Our partners include specialists in investments, planning, tax, estate, and service. We work with our clients to realize their goals and live in accordance with their Judeo-Christian values and beliefs.