5 types of financial advisors

Financial Planners

Below are five types of financial advisors, the types of services they offer, and the pros and cons of each. Of course, many of these roles overlap each other in important places.

1. Robo-advisor

A robo-advisor is a type of financial advisor that automates the investment process and builds investment portfolios. Robo-advisors can handle many mechanical investment tasks, as well as advanced tasks that are difficult for human advisors to manage.

Strong Points

  • Low cost, often as little as 0.25 percent of annual assets, or $25 for every $10,000 invested
  • High-end features such as loss recovery and portfolio rebalancing
  • May provide human advisors, including highly qualified and certified financial planners
  • Easy to use, just make regular deposits after making an initial investment plan


  • unparalleled advice. This means that you may not get advice tailored to your situation.
  • If you are not working with a human advisor, you may not be motivated to execute your plan

2. Certified Financial Planner (CFP)

A Certified Financial Planner is a highly qualified advisor who has been granted a CFP designation by the CFP Commission. CFPs may understand a wide range of financial issues and, importantly, have a responsibility to act with fiduciary duty as clients.

Strong Points

  • Experienced professionals with a minimum of 4,000 hours of work experience and a passing qualification exam
  • Adhere to fiduciary standards, i.e. take responsibility for doing what is best for the client
  • Extensive knowledge covering key financial and investment topics
  • May provide incentives to stick to investment plans even in recession


  • You may not be an expert on all topics, so you may need an expert on a specific topic
  • May require a large amount of capital to get started
  • May not match your personality or financial needs

3. Asset manager

Wealth managers provide high net worth individuals with comprehensive advice on a wide range of financial topics, especially on building and maintaining wealth over the long term. Major topics include investment management, financial planning, real estate planning, tax planning, etc.

Strong Points

  • Comprehensive financial management centered on assets
  • Focus on wealthy issues such as building wealth and passing it on to heirs
  • May focus on more esoteric issues such as tax and estate planning
  • May hold a CFP or other professional certification
  • It may help you stick to your long-term plans during a downturn


  • Fees can be high depending on assets under management
  • May not be a trustee.That means they don’t always act in your best interests
  • Requires a large amount of investable assets to get started
  • Experts may still be needed for niche topics such as legal issues

4. Portfolio manager

Portfolio managers focus more narrowly on your investments and everything related to them. A portfolio manager therefore selects your investments, decides when to sell, recovers capital losses as tax deductions, and generally manages other investment matters in your life.

Strong Points

  • May help you find attractive investments to increase your net worth
  • Possibility of outperforming the market due to familiarity with securities
  • Useful during market downturns when it is difficult to continue investing
  • May hold a major professional title such as Certified Financial Analyst (CFA)


  • Narrow focus, i.e. advisors are less familiar with other financial issues
  • May not be a fiduciary obligated to act in your best interests
  • May require a large amount of capital to get started

5. Financial Salesman

Some financial advisors are actually sales representatives of financial companies. That is, they have a strong interest in selling the products their company sells. While these products may be suitable for your needs, they may have higher fees or may not be optimal for your particular situation.

Strong Points

  • knowledgeable about the company’s products and services
  • May have extensive industry expertise


  • Your needs may come second or third as we are encouraged to sell our products
  • May be unreliable due to misaligned incentives
  • High fees may be embedded in the price of financial instruments
  • “Free” advice is often not so free when investment performance lags

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