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Which Financial Advisor Is Right for You?

April 10, 2017

Marcus Winbush, CFP® — CEO, True North Capital Alliance

We all have financial goals and dreams we would like to have come true, but all too often, dreams go unrealized or only partially fulfilled because we lack clear, actionable plans.

Is now the time for you to take your financial planning to the next level? Are you ready to become more intentional about funding your retirement and leaving a legacy for the people and causes dear to you? Or perhaps you are ready to start investing for the first time. Any one of these is an excellent reason to seek financial planning or investment assistance. If this is your time, let’s consider which type of financial planner might be right for you.

Many Financial Professionals Call Themselves Financial Planners

The term financial planner covers a variety of titles, services, and skills: financial advisors, financial representatives, financial consultants, brokers, or investment advisers. From their titles, you might assume they all do pretty much the same functions and have the same regulatory oversight. That assumption would not be accurate.

According to the Financial Industry Regulatory Authority (FINRA), “the first step in selecting an investment professional is to see if the person and his or her firm are registered.” Financial professionals in this category include investment advisors, Certified Financial Planners®, and registered representatives.

Investment Advisor

Investment Advisors (IAs) also called Registered Investment Advisors (RIAs) provide advice about securities and a broad array of financial/investment services. Services may include financial planning for college education and retirement, estate and investment planning, and asset management.

IAs must be registered with either the Securities and Exchange Commission (SEC) or state securities regulators, depending on the amount of assets they manage. Typically, RIAs do not “sell” proprietary investment products; their compensation comes primarily from fees they charge for their advisory service. At a minimum, IAs must pass the Series 65 exam administered by FINRA, but they usually add other credentials such as the CFP® designation to enhance their qualifications.

Certified Financial Planner®

Advisors who earn the CFP® designation are also qualified to provide investment advice for a full suite of services, including retirement, estate, and investment planning as well as asset management. To earn the CFP® designation, advisors must complete a comprehensive course of study approved by the CFP Board followed by a rigorous CFP® Certification Exam, which tests their ability to apply financial planning knowledge to real-life situations. Before they can use the CFP® designation, advisors must have several years of hands-on experience providing financial service for clients.

Another significant distinction relates to the standard of care you can expect. CFP® professionals and other registered advisors are bound by the fiduciary standard established in the Investment Advisor Act of 1940. To comply with the fiduciary standard, investment advisors must act solely in the “client’s best interest when offering personalized financial service.” This means that registered advisors must not recommend an investment simply because they will receive more compensation from that investment. It also means that advisors must make sure their advice is accurate, complete, and as thorough as possible. RIAs are responsible for providing clients with objective advice.

Broker/Registered Representative

Brokers, sometimes called registered representatives, are licensed to buy and sell securities—stocks, bonds, mutual funds, and other investment products. A broker or a registered representative working on behalf of a broker-dealer must fulfill the suitability standard of care for clients.

The suitability rule states that brokers must make recommendations that are consistent with the best interest of the customer; it does not require the broker to place his or her interest below that of the client. This means that if an investment fits the needs of the client in some way, the broker is free to recommend the investment that pays them more money even though if may mean higher expenses for the client. Ultimately, it is important to realize that brokers’ primary role is to represent their broker-dealer, not the client.

What’s Right for You?

Many investors find the Certified Financial Planner® to be an excellent choice because of their experience, educational qualifications, and certification standards. With these factors as background information, you will need to interview the advisor you are considering. Finally, before you commit to work with an advisor, be sure you are comfortable with their investment philosophy and investment strategies. Also, look for someone you trust and with whom you can communicate effectively.

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Advisory services are provided through True North Global Research, Inc., d/b/a True North Capital Alliance, a Minnesota Registered Investment Advisor, with notice filing in Texas


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