5 types of financial advisors

Financial Planners

Having a financial advisor in your life can bring great benefits, including getting your finances in order and making wise financial decisions. Encouraging you to stick to your plan, you can be sure that you will not only feel safe in the present, but will also promote wealth in the future.

However, financial advisors vary greatly in their focus and expertise, professional standards, and how they are compensated.

To help you get a better understanding, here are 5 types of financial advisors, what they can do for you, and their pros and cons.

What is a financial advisor?

Financial advisor is a general term that has come to encompass a person who provides guidance on financial topics. This definition allows almost anyone who provides financial assistance to call themselves an advisor. However, the types of financial advisors can vary dramatically, and those seeking guidance should understand the types of services offered by different advisors.

Advisors can help you plan your retirement, budget and organize your finances, make real estate plans, manage your investments, find the best time to get Social Security, and much more. In short, an advisor can help you with any financial question or strategy.

Advisors can be compensated in a variety of ways. They are paid by the hour or by the work they do, or they may earn a percentage of the assets under management if they are investing. Some advisors are fee-only and only paid by the client. Others may earn commissions not only from their customers, but also from the financial firms that sell their products. In addition, they may be fully compensated by the financial products they sell to their clients.

5 types of financial advisors

Below are five types of financial advisors, the types of services they offer, and their pros and cons. 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 and can also perform some advanced tasks that are difficult for human advisors to manage.

Strong Points

  • Low cost, often as little as 0.25% of annual assets, or $25 for every $10,000 invested

  • High-end features such as tax loss harvesting and portfolio rebalancing

  • May provide human advisors, including highly qualified financial planners

  • Easy to use, just make an initial investment plan and make regular deposits

  • The best robo-advisors cost almost nothing to start investing


  • unparalleled advice. This means that you may not get highly tailored advice for your situation.

  • Not working with a human advisor may not motivate you to stick to your plan

2. Certified Financial Planner (CFP)

A Certified Financial Planner is a highly qualified advisor with CFP certification from the CFP Commission. CFPs may understand a wide range of financial matters and, importantly, are asked to act with a fiduciary duty to you as a client.

Strong Points

  • Experienced professionals who have delivered a minimum of 4,000 hours of service and passed a certification exam

  • Uphold fiduciary standards, which means we have a responsibility to do what is best for our clients

  • Extensive knowledge including key financial and investment topics

  • May motivate you to stick to your investment plans during a downturn


  • I may not be an expert on all topics.This means you may need an expert on a particular topic

  • You may need a lot of money to get started

  • May not suit your personality or financial needs

3. Wealth manager

Wealth Managers provide comprehensive advice to high net worth individuals on a wide range of financial topics, especially those related to building and long-term wealth preservation. Major topics include investment management, financial planning, real estate planning and tax planning.

Strong Points

  • Comprehensive financial management of assets

  • Focuses on wealthy issues, including building wealth and passing it on to heirs

  • May focus on more esoteric issues such as taxes or estate planning

  • May hold a CFP or other professional certification

  • May help keep long-term plans in recession


  • Fees based on assets under management can be high

  • May not be a trustee. This means that they don’t always act in your best interest.

  • Requires significant investable assets to get started

  • May need experts in niche topics such as legal matters

4. Portfolio manager

Portfolio managers have a more limited focus on investments and everything related to them. Therefore, a portfolio manager selects investments, decides when to sell, recovers capital losses as tax credits, and generally manages other investment matters in your life.

Strong Points

  • May help you find attractive investments to increase your net worth

  • Possibly familiar with securities, helping you outperform the market

  • Useful during market downturns when it can be difficult to stay invested

  • May hold a major professional credential, such as a Chartered Financial Analyst (CFA)


  • Advisors are less familiar with other financial issues due to their narrow focus.

  • May not be a fiduciary with an obligation to act in your best interests

  • You may need a lot of money to get started

5. Financial salesperson

Some financial advisors are actually sales representatives of financial companies. So they are really interested in selling the products that the company sells. While these products may suit your needs, they may charge higher fees or may not be optimal for your particular situation.

Strong Points


  • Incentives to sell products. That means your needs may be her second or third priority.

  • You may not trust them due to mismatched incentives

  • High fees may be embedded in the price of financial instruments

  • “Free” advice is often not so free if your investment performance is lagging

How to choose the right type of financial advisor

The right type of financial advisor starts with what you need. Therefore, potential new advisors should be aligned with your goals and aspirations. A wise and collaborative advisor can help dramatically improve your financial life. So when you hire a financial advisor, it’s basically a job interview to make sure the advisor is a match for you.

Bankrate’s Advisor Matching Tool allows you to get started with an advisor in your area in minutes.

Below are five key questions to ask a potential advisor.

  • Are you a trustee? Trustees have a duty to work in your client’s best interests and help align their actions with your goals, which is especially strong if you are a fee-only trustee.

  • How will I be paid? “He who blows the whistle calls the tunes.” Paid-only advisors you pay work in your best interests, rather than salespeople who act as advisors or are otherwise paid. more likely.

  • How can they help you reach your financial goals? It’s easy to overlook the value of having an advisor who can motivate you during the difficult times that inevitably arise. Sticking to a game plan is even more important on down days.

  • How does your company evaluate your performance as a financial advisor? This question will ensure that the advisor’s performance is measured around the importance of incentives and the aspects that help the firm achieve its goals.

  • What happens when you change companies? Ideally, we want to hire advisors for the long term and build trust with them in line with our goals. Therefore, if that advisor moves to another company, you should be able to follow that advisor.

Answers to these questions will help you decide if a particular financial advisor makes sense for you. It’s also worth checking which advisors your friends and colleagues recommend, as you may be able to piggyback on their experiences. However, you should always conduct your own interviews to see if the advisor fits your needs.

Here are six key things to look for when looking for a new financial advisor.


Investors may encounter different types of financial advisors, so it’s important to know your goals and whether you need investment advice, financial planning, or something else. Advisors are there to work for you, so you want to make sure they are aligned with your goals.

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