When you’re trying to make smart decisions, you sometimes need expert guidance. Financial advisors earn a living by helping people decide how to manage their money, including investments, and reach financial goals.

“Financial advisor” isn’t an official designation, and the term can apply to people with a variety of specialties. For example, a registered investment advisor is a type of financial advisor who typically focuses on investment portfolios. A certified public accountant is another type of financial advisor who generally focuses on tax and accounting services. Some CPAs also hold the personal financial specialist designation that signals a broader focus on financial planning.

A financial advisor can also hold multiple designations and licenses. A registered investment advisor, for example, could hold both the certified financial planner and CPA designations. The alphabet soup can get confusing, but with a little research, you can find the best expert for your situation.

4 types of financial advisors

To start, it’s important to know if your advisor is a fiduciary, meaning that he or she puts clients’ interests first. Many advisors, such as registered investment advisors and members of the National Association of Personal Financial Advisors, the Garrett Planning Network and other groups, abide by the fiduciary standard in all of their work with clients. (The fiduciary rule you might have heard about in the news applies only to retirement accounts. Also, it’s under review and might change. Get a rundown on the U.S. Department of Labor website.)

Here are the major types of financial advisors:

Registered investment advisor. RIAs are registered with the U.S. Securities and Exchange Commission or a state regulator, depending on the size of their company. They’re held to a fiduciary standard in dealing with clients. Some RIAs focus on investment portfolios, while others take a more holistic, financial planning approach.

Certified financial planner. This designation, offered through the Certified Financial Planner Board of Standards, requires completing a lengthy education requirement, passing a stringent test and demonstrating work experience. All abide by a fiduciary standard when providing financial planning services.

Robo-advisor. These online advisors use computer software and algorithms to manage clients’ investment portfolios, often at a fraction of the cost of a live advisor. Read more about how robo-advisors work and what they cost. Some offer access to live advisors as well.

Broker. Also known as registered representatives, these people sell stocks, mutual funds and other investments at a brokerage or broker-dealer. They’re generally required to sell products that are “suitable” for clients, a lower standard than the fiduciary standard, because a suitable investment isn’t necessarily the best one for you. For example, a suitable investment might cost more — and bring a higher commission to the broker — than an investment that’s in your best interest. The Labor Department’s fiduciary rule currently applies to brokers only with regard to retirement accounts.

You also might come across chartered financial analysts, who can help you build an investment portfolio; enrolled agents, who focus on tax preparation; and wealth managers, who usually concentrate on high-net-worth clients; as well as other types of experts.

Written by ANDREA COOMBES

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