What are the Different Types of Financial Professionals?
Financial professionals. Agents. Advisors. Planners. The world of financial advice is filled with titles that feel related—but are they all the same? What’s the difference between an advisor and a financial planner? How do you know who to turn to when you have a question about your retirement, your taxes, or just money in general? How do they get paid?
Let’s break down the primary types of financial professionals, how they are paid, and the types of things they specialize in, so you can determine who to talk to when you have questions.
1. The term financial professionals refers to a number of professions in the financial services industry, including insurance agents, accountants, investment managers, financial planners, and financial advisors.
- How are they paid? Financial professionals are paid based on their specific area of focus. For example, insurance agents are paid differently than financial advisors.
- When can they help? Financial professionals can assist you in a variety of areas, depending on their focus.
Insurance agents can be helpful when you need to protect your life or property, or when you’re planning for retirement.
2. Insurance agents can help protect individuals against certain risks. Life insurance and fixed annuities are agents’ core products. Some agents also sell personal insurance, including auto, homeowners, liability, and health. If trouble or tragedy strikes, your coverage may provide a cash payout. When you’re ready to retire, products like life insurance and annuities can provide an income for the rest of your life.
- How are they paid? Fees for insurance agents are typically built into the product purchase price. There are generally no minimum investment levels because they can accept a lump sum or monthly installments.
- When can they help? Insurance agents are helpful when you need to protect your life or property, or when you’re planning for retirement.
3. Financial advisors focus on investment products, including stocks, bonds, and mutual funds. They also manage portfolios, deliver financial plans, recommend investments, are securities licensed, and help monitor financial performance versus goals over the long term.
- How are they paid? The investor pays an annual percentage on the assets the financial advisor and his or her firm are handling.
- When can they help? If you have a lump sum or accumulated savings and want to commit to the stock market, a financial advisor can help.
4. Registered investment advisors (RIAs) are similar to financial advisors. These professionals are licensed and regulated and run operations to help people who have accumulated savings that they would like to invest.
- How are they paid? Similar to financial advisors, RIAs are usually paid an annual percentage on the assets they manage.
- When can they help? If you have a lump sum or savings that you’d like to invest in the stock market, and you feel that large firms are too impersonal, you may want to speak with an RIA.
5. Financial planners deliver financial plans, which you can initiate on your own or through a financial advisor. This service also includes ongoing reviews and guidance. Financial planners are like architects who design a house—they can create the plan, but you need to hire the contractors to build it.
- How are they paid? Financial planners are often paid by the hour or at a fixed rate for delivering your plan.
- When can they help? If you have a more complicated financial situation or are setting long-term goals, a financial planner can help you design a plan that will help you achieve those goals.
6. Accountants primarily provide tax advice and file tax returns in an attempt to legally minimize your taxes. In most cases, they will represent you with the IRS if you are audited.
- How are they paid? They are typically paid by the hour, although they might file personal returns for a flat fee.
- When can they help? If you want a professional to file taxes on your behalf because you are uncomfortable completing the form or you have a complex return.
Financial professionals may have multiple licenses, certifications, and tools at their disposal to provide a variety of services. Asking questions during your first meeting can help determine which professional is able to help with your specific needs.