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What Type of Financial and Investment Professional Is Right for You?

Stockbrokers, investment advisers, financial advisors, financial planners—so many of these titles sound the same, but the differences can be profound. When it comes to choosing a financial and investment professional, it is important to remember that not all titles are interchangeable. In this blog post, we’ll explain the differences between the most commonly encountered investment and financial professionals: brokers, investment advisers, and financial planners.

 

Stockbrokers

A broker-dealer is a person or company in the business of buying and selling securities—stocks, bonds, mutual funds, and certain other investment products—on behalf of their customers (as broker), for their own account (as dealer), or both. Individuals who work for broker-dealers are called stockbrokers, or registered representatives with the Securities and Exchange Commission (SEC), pass qualifying exams, and must be a Financial Industry Regulatory Authority (FINRA) member.

Stockbrokers

  • earn commission on each transaction made on your behalf,
  • are required to make “suitable” investment suggestions based on your income, portfolio, risk tolerance, investment objectives and overall financial situation, but
  • do not have a fiduciary duty to act in your best interest, despite the previous requirement.

 

Investment Adviser

An investment adviser is an individual or company paid to provide advice about securities to their clients. Though the term sounds similar to “financial advisor,” the two should not be confused, the latter being a generic term that usually refers to a broker.

Investment advisers

  • may charge an hourly or fixed fee, or earn commissions (if they are also a broker-dealer) or a percentage of the value of the assets they manage for you, or ask for a combination of these,
  • must pass the FINRA Series 65 exam or the Series 7 exam along with the Series 66 exam, and
  • are fiduciaries with “an affirmative duty of ‘utmost good faith and full and fair disclosure of all material fact,’ as well as an affirmative obligation ‘to employ reasonable care to avoid misleading’ clients” (according to none other than the Supreme Court).

 

Financial Planners

Finally, a financial planner is an individual or company who helps their clients meet short- and long-term financial goals by evaluating their financial status and developing programs to meet their objectives. It is important to note that individuals who call themselves financial planners come from varied backgrounds and may offer a variety of services. They may examine your entire financial picture and help you to develop a detailed plan for achieving your financial goals, or they may only recommend products they sell, giving you a limited range of choices.

The CERTIFIED FINANCIAL PLANNER™ and (CFP® ) designation is issued by the Certified Financial Planner Board of Standards and requires at least three years of experience as well as adherence to fairly rigorous standards.

CERTIFIED FINANCIAL PLANNER™ Professionals

  • may charge for their services by fee or commission (a fee-only CFP® practitioner does not receive commission on products sold),
  • must successfully pass a comprehensive exam and meet minimum continuing education requirements covering topics such as asset protection planning, taxes, insurance, estate planning and retirement, and
  • are held to certain fiduciary responsibilities, including placing the interests of the clients before their own.

 

When hiring a professional, it is important to inquire about his or her credentials and to clarify both what any designation means and how it was earned. The Financial Industry Regulatory Authority (FINRA) provides a glossary of professional designations on its website. If you are still unsure, click here to learn more about choosing a financial and investment professional.

 

 

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Domani Wealth, LLC-“Domani”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Domani.  Please remember that if you are a Domani client, it remains your responsibility to advise Domani, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Domani is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Domani’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Domani does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Domani’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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