This post is a continuation of the last post, Who is your Financial Advisor? Here I will discuss some of the more common titles and licenses used in the finance services profession. These are titles which professionals use to promote themselves. Some of these titles are given to them by their broker-dealer, some are titles provided to them by obtaining a license and passing a test for proficiency, and some are self-designated.
Financial Advisors, their titles, and licenses
This is not an exhaustive list. There are many title professionals choose to call themselves. This post is only meant to discuss the more popular ones to help you navigate through all the terminology. Here is a list of the most commonly used titles for the finance-related profession:
“Stockbroker”, is used to describe someone who buys and sell securities on behalf of their clients in exchange for commissions. This person works at a broker-dealer or “wirehouse” and most likely would have a license such as a series 7, series 66, series 63 or others. Having qualified for a series 7 license would give that person the title of Registered Representative (RR) or “Rep”. The overseeing regulatory body for a Rep. is currently FINRA. While the title of “broker” is slang, and is currently not commonly used, in past decades it was a more common moniker to describe the financial professional. In more recent years the brokerage industry has attempted to move the public perception from being a “broker” to more of an advisor or consultant due to the increased public interest in advisors over brokers. Many brokers don’t like the term “broker” and consider it a pejorative term.
Financial advisor is one of the most common titles used by licensed financial professions. This title was commonly given to Paine Webber representatives on their business cards and marketing materials when I was at the firm in the early 2000s. This title has no legal or regulatory meaning. It is strictly used for marketing purposes. While it is commonly used by most Brokers and Advisors, anyone could legally use this to describe themselves, including attorneys, insurance agents, brokers, investment advisors, financial planners, accountants, even dentists. Since this is one of the more commonly used titles, the investing public, who are looking for a specific type of financial advisor, could be easily confused with the many different variations. This does not help you determine a person’s qualifications strictly by title.
Financial Consultant was commonly given to Smith Barney representatives on their business cards and marketing materials. This was my title when I worked at Smith Barney back in 2004. This has no legal or regulatory meaning. It is strictly used for marketing purposes. While it is commonly used by Brokers and Advisors, anyone could legally use this to describe themselves. This does not help you determine a person’s qualifications strictly by title.
Financial planner is one of the more commonly used and misused titles in the financial advisory industry. Many professionals use this title to describe their holistic services of providing individuals and families with a financial plan. Constructing a financial plan is the first step in any financial advisory relationship. Unfortunately, there is no legal or regulatory standard for calling oneself a financial planner. This has allowed people to use the title in order to project a professional image that the person is providing unbiased financial planning services, when in fact, they may not be. I know of quite a few insurance agents who use this title to brand themselves as a financial planner in order to sell more insurance products to unsuspecting clients. If someone calls themselves a financial planner, be sure to check their licenses and certifications to make sure you know what you are getting from that person as a professional. Do not confuse a Financial Planner with a Certified Financial Planner®. This does not help you determine a person’s qualifications strictly by title.
Investment Advisor Representative (IAR)
Investment Advisor Representative (IAR) has legal and regulatory meaning. This title is conferred to someone who has passed the series 65. This person would be required to use a fiduciary standard of care with their clients. A fiduciary standard of care is one of the highest standards of care from a legal and regulatory sense. This is one of the highest standards of care. Clients should seek to work with professionals who are bound to high standards of care. An IAR is either regulated by the SEC or the state’s securities agency. This license and title do not allow the professional to buy or sell securities for commissions. This is a fee-only license, where the professional can only get compensated directly by the client directly and cannot obtain commissions from product providers, or other related sources without disclosure to the client. This is the most transparent forms of compensation. Clients should consider an advisor who has this distinction if they want transparency. This title is not commonly used by advisors in marketing materials due to its length and better substitutes such as financial advisor, or even investment advisor which is a shorter version of this title. This license can be combined with the next one, Registered Representative, if the person has passed both certification tests.
Registered Representative (RR)
Registered Representative has legal and regulatory meaning. This title is conferred to someone who has been licensed by passing the series 7 test. The Registered Representative or “Rep” would be able to use the license at a broker-dealer to buy and sell securities for clients in exchange for commissions and would be regulated by FINRA. The standard of care for RRs in recommending securities is that they are “suitable” at the time of the transaction. The rep is not responsible for any of the securities sold to the client after the purchase or sale of them. There is no “fiduciary standard” of care requirement with this designation. This title is almost never used in any public or marketing manner. Trends in the financial service industry have shifted away from using this title in favor of titles such as financial advisor.
Wealth manager does not have any legal or regulatory meaning. It is not a commonly used title. It is used to confer a holistic approach to working with clients inclusive of financial planning, investment management, and specialized services such as legal, tax or estate planning advice. It is frequently used in single or multi-family offices, Registered Investment Advisory (RIA) firms, or private client groups at large firms. This is the title I choose to use to describe my services over the other alternatives.
Insurance agent is a state-licensed professional who is licensed to sell insurance products in different lines of insurance. These products typically consist of life insurance, long-term care insurance, health insurance, property and casualty insurance, and annuities. This profession is closely related to financial advisors. Unfortunately, there is a lot of overlap from both financial advisors selling insurance products and insurance agents promoting themselves as financial advisors. This has obfuscated the line between the two professions. Some financial advisors are licensed to sell insurance, and some insurance agents have become licensed to sell financial service products through a broker-dealer. What is important to note is that while both professions are important in the financial planning process, it is more important to understand what value each can provide to you. I am planning on writing a future post to help differentiate the two and give you a better understanding of each profession when you work through the financial planning process.
What should you look for in a financial professional?
Hopefully, this has shed some light on the profession and helped you distinguish between a few terms which you have heard before. The first question you should ask is, “what are you looking for?” Are you looking for insurance, a financial plan, a holistic approach to your family’s finances, or buying stock, bonds, and mutual funds? Once you understand what your needs are, you will have a better understanding of the type of professional you need to help you.
A jack-of-all-trades is typically a master of none. Be wary of the financial advisor or insurance agent who tries to provide all the services themselves. A holistic financial advisor or wealth manager will understand that they don’t need to do everything themselves. They will act as a quarterback to help coordinate different professionals together so that the client has the best advice from professionals who are a master in the area which is needed.
If you have any questions regarding these descriptions or who is the right advisor for you, contact me and I can guide you in the right direction.
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About Innovative Advisory Group: Innovative Advisory Group, LLC (IAG), an independent Registered Investment Advisory Firm, is bringing innovation to the wealth management industry by combining both traditional and alternative investments. IAG is unique in that they have an extensive understanding of the regulatory and financial considerations involved with self-directed IRAs and other retirement accounts. IAG advises clients on traditional investments, such as stocks, bonds, and mutual funds, as well as advising clients on alternative investments. IAG has a value-oriented approach to investing, which integrates specialized investment experience with extensive resources.
For more information, you can visit www.innovativewealth.com
About the author: Kirk Chisholm is a Wealth Manager and Principal at Innovative Advisory Group. His roles at IAG are co-chair of the Investment Committee and Head of the Traditional Investment Risk Management Group. His background and areas of focus are portfolio management and investment analysis in both the traditional and non-traditional investment markets. He received a BA degree in Economics from Trinity College in Hartford, CT.
Disclaimer: This article is intended solely for informational purposes only, and in no manner intended to solicit any product or service. The opinions in this article are exclusively of the author(s) and may or may not reflect all those who are employed, either directly or indirectly or affiliated with Innovative Advisory Group, LLC.