A financial adviser is somebody who provides people with advice on how to manage their finances. The adviser has specialist knowledge of investments, loans, savings, and money management.
Spelling: both ‘adviser’ and ‘advisor’ are correct. In the US, ‘advisor’ is more common than in other English-speaking countries. Even so, ‘adviser’ is still more common in the US than ‘advisor. All US Congress documents use the spelling ‘adviser.’
Financial advisers suggest and render financial services to their clients based on their financial situation.
Financial adviser – license
In some countries, advisers must have a license, which they obtain after completing comprehensive training.
In the US, you must carry a Series 65 or 66 license. The US Financial Industry Regulatory Authority (FINRA) says that accountants, brokers, investment advisers, and lawyers can describe themselves as financial advisers. Financial planners and insurance agents are also allowed to use the term.
In the UK, three main bodies award qualifications: 1. The Chartered Insurance Institute. 2. The Institute of Financial Planning. 3. The IFS School of Finance.
What do they sell?
Financial advisers usually sell financial products and services. In some countries, what they sell depends on their type of license.
Insurance agents typically provide insurance advice and sell life insurance and variable annuities.
Advisers may sell financial products, create financial plans for their clients, or do both. Nearly all advisers provide advice and insight into savings.
Some focus exclusively on specific products: like selling employee pension schemes to companies or offering advice on mortgages, pensions, or investments to individuals.
Others take a broader approach, providing guidance across various areas including saving plans and insurance, as well as those more specialized financial products
Independent and restricted advisers
There are two main types of financial advisers:
- Independent Advisers are free to research and consider all retail investment products and financial instruments. It is their duty to provide clients with unrestricted and unbiased advice.
- Restricted Advisers can only discuss and offer a limited range of financial products. Many advisors who are bank employees can only sell their banks’ financial products. This is not the case with all banks.
A financial instrument is a monetary contract between two entities. Stocks and shares, bonds, and derivatives, for example, are financial instruments.