Are There Different Types of Advisors?

Our challenge as small investors begins as soon as we initiate a search for an advisor. Instantly, we find ourselves drowning in a sea of titles and credentials. We discover that there are: brokers, estate planning professionals, financial advisors, financial analysts, investment advisors, investment advisor representatives, investment consultants, money managers, financial specialists, portfolio managers, registered representatives, registered principals and registered investment advisors, among others. Complicating matters further, these advisors bombard us with a multitude of certifications bearing similar-sounding acronyms: CFP®, CFA®, ChFC®, CPA, RIA, CWM™, CFS®, CIMA®, CLU®—to name just a few.

The proliferation of titles complicates your task, because many of them are used quite loosely. While some of the titles were associated with distinct functions decades ago, those distinctions have since then all but disappeared, making current designations less informative. To find what you need to know, avoid attempting to define each title. Instead, focus on understanding the basic or primary functions advisors serve and the fundamental characteristics (alignment, credentials and fees) that are most advantageous in any advisor, regardless of title. You will then be able to choose an advisor based on desirable characteristics, thereby sidestepping the confusion that may arise from titles and credentials.

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