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An advisor (or counselor) is a person who gives advice. In the world of finance, there is some confusion as to which spelling to use when referring to a financial advisor. Fortunately, explaining both is correct, although there is a slight difference between the terms.
An advisor or counselor?
In everyday language, a consultant with “o” and a lawyer with “e” are one and the same.
But the U.S. Investment Advisers Act of 1940 (an act that spells out exactly what that is investment advisor uses the spelling “advisor” with “e”. Because of this, some financial advisors prefer to follow the state language, while others like to write “advisors”.
Important for consumers: The spelling of your financial professionals has nothing to do with their level of knowledge. What matters – the certification of a consultant and the type of financial advice – is up to you.
Regardless of the job title, a financial advisor who provides investment advice must register in the United States. Securities and Exchange Commission or their state. You should always confirm the registration status of a potential advisor and any other certification they have. You can view the knowledge of an investment advisor through BrokerCheck Regulatory Authority of the Financial Industry, which provides information from both the SEC and registered government investment advisers.
What do advisors do?
Financial advisors can invest money for you, help you come up with a financial plan, help save for retirement and other goals, and answer your financial questions. Making financial decisions can be stressful and emotional, and a good counselor should be able to help clearly see your choices.
For example, say, as an advisor there is a client who has turned 30 years old and a 401 (k) employer. After analyzing a client’s financial information, determining her risk tolerance, and discussing her goals, the counselor can offer advice on how much she should contribute to her 401 (k) as other retirement accounts, such as an IRA, can consider her plan. and what investments she should choose. The consultant can then manage these investments across all of their accounts, making changes and balancing as needed. In addition, the counselor can offer a complete financial plan to help her achieve other goals – for example, advice on how to save on the down payment, how much home she can afford and what insurance coverage she needs.
There are several types of advisors, but NerdWallet recommends working with CFP. Advisors who have achieved CFP appointments have years of experience and adhere to standard trust, that is, they are required to act in the best interests of their client.
Do I need an advisor?
If you are struggling to manage your finances or save enough goals or you have recently had a major life event (you inherited, gave birth to a child or started pooling finances after marriage), you could benefit from talking to a counselor.
If a personal, traditional financial advisor goes out of your budget (you can find out about it how much does a financial advisor cost), robo-advisors and online financial planning services can provide similar assistance at a much lower cost.
Robo advisors use a computer algorithm to select and manage investments for you based on your risk tolerance and other financial information. Online planning services use similar algorithms to manage investments, but also provide access to human advisors who can answer your financial questions or even provide a comprehensive financial plan.
If you are interested in getting help managing your financial life, check out some of our best choices for financial advisors below.