Types of Financial Advisors

With so many options to choose from, it can be hard to pinpoint which type of financial advisor to hire. This page will help you understand what each type does, so you can make this decision with confidence. We’ll break down the different categories of experts, as well as common designations to look out for (and why they’re important). You’ll also learn how to select a professional from the crop.

List of Finance Advisory Roles

There are many types of financial advisors for clients of various asset levels to choose from. Most of these differ based on the discipline or specialization they practice, such as planning, investment management, and the like. Others stand out because of their professional designation, bestowed to them by prestigious organizations such as the CFA Institute or the CFP Board.

Keep in mind that while a financial advisor may fit into a specific category or role, it’s not always the only task they specialize in. For instance, a financial planner may also have experience managing investments, or vice versa. As we’ll touch on further down the page, it’s important to find out what a given professional’s expertise and experience are before selecting them, as they may be able to help with a wide range of tasks.

Below is a list of the most common types of financial advisors, including a brief description of each to help you understand them further:

Certified Divorce Financial Analyst (CDFA)

CDFAs are financial advisors that specialize in assisting clients with navigating the financial consequences of divorce. This includes assessing tax implications, building a new retirement plan, and collaborating with other divorce professionals, such as attorneys and accountants.

Certified Exit Planning Advisor (CEPA)

CEPAs are a type of a financial advisor that assist specifically with planning for and carrying out an exit from a business. This includes mergers, acquisitions, and legacy planning. These experts receive their certification from the Exit Planning Institute after completing a set of rigorous requirements.

Certified Financial Planner (CFP)

CFPs are professionals who’ve received their designation from the CFP Board after completing rigorous experience and education requirements, including two exams. They’re highly skilled in helping clients plan for and manage various aspects of their finances, including:

• Retirement
• Education
• Estates
• Taxes
• Investments
• Risk management

Because of their certification, CFPs are bound by a fiduciary duty. This means that any advice or recommendations they give must be in their client’s best interest.

Certified Investment Management Analyst (CIMA)

CIMAs are professionals that specialize in helping clients with investment advisory and portfolio management. They are skilled in a wide array of advanced financial topics and have a breadth of knowledge in portfolio construction and behavioral finance. These experts receive their certification from the Investments & Wealth Institute (IWI) after passing a rigorous set of requirements involving both education and experience.

Certified Public Accountant (CPA)

CPAs are accountants with a license to practice in their state. While being a CPA isn’t a requirement to be an accountant, it represents those with the highest level of experience and expertise. They can assist clients, either individuals or firms, with various accounting-related tasks, such as:

• Auditing
• Compliance with laws and regulations
• Financial planning
• Forensic accounting
• Maintaining detailed and accurate records
• Tax planning and preparation

Unlike other certified professionals on this list, CPAs aren’t bound by a fiduciary duty because of their credentials. Rather, they may need to adhere to this standard if their role requires it, such as when they’re directly managing a client’s books or if they have power of attorney.

Certified Private Wealth Advisor (CPWA)

Certified Private Wealth Advisor (CPWA) professionals earn their designation from the Investments and Wealth Institute. They specialize in assisting high- and ultra-net-worth clients with managing and planning their complex portfolios. Additionally, these experts are highly experienced with investment management and estate planning tasks for wealthy individuals and families.

Chartered Alternative Investment Analyst (CAIA)

A CAIA is a finance professional who specializes in helping clients select, manage, and monitor alternative investments, such as hedge funds or private equity. They receive this designation from the CAIA Association (CAIAA) after completing two different curricula and their accompanying exams.

CAIAs are versatile and may work either directly with clients or within firms of varying sizes. Keep in mind that if you’re interested in alternative investments and would like to hire a CAIA, you typically need to be an accredited investor with at least:

• $200,000 income in each of the last two years (or $300,000 combined if you’re married)
• $1,000,000 in total net worth

Chartered Financial Analyst (CFA)

Typically, a CFA specializes in investment and portfolio management for individual or institutional investors. They’re especially geared toward clients in need of wealth management.

CFAs represent the highest level of financial expertise. To become one, individuals must have 900 hours of self-study, a bachelor’s degree, and 4,000 hours of work experience. They must also pass three exams after approximately 300 hours of studying.

Chartered Financial Consultant (ChFC)

ChFCs specialize in advanced financial planning. They receive their designation from The American College of Financial Services and adhere to a fiduciary standard. Typically, they can assist clients with the following areas of their finances:

• Cash flow
• Taxes
• Retirement
• Estates
• Insurance
• Employee benefits
• Risk management
• Investments

Chartered Life Underwriter (CLU)

CLUs are professionals that assist clients with mapping out their life insurance policy, as well as how it fits in with their estate and retirement plans. These experts earn their designation from The American College of Financial Services and must follow a high level of ethics.

Chartered Retirement Planning Counselor (CRPC)

CRPCs are retirement planning professionals who receive their designation from the College for Financial Planning. They assist clients who are approaching the end of their career with selecting investments and making the right financial decisions. Additionally, they continue to work with retirees to ensure their income and investments are performing well enough to maintain their lifestyle.

Financial Counselor

Financial counselors are experts who typically carry the Accredited Financial Counselor (AFC) designation from the Association for Financial Counseling and Planning Education (AFCPE). To attain the role, individuals must complete a variety of requirements, including education, an exam, and 1,000 hours of prior experience. They are often able to assist clients with:

• Financial planning
• Budgeting
• Managing debt
• Risk management
• Managing large expenses

Financial Planner

This is a term that more broadly refers to professionals who assist with financial planning, such as a CFP, ChFC, or financial counselor. When you meet with one of these professionals, they’ll typically aim to gain a basic understanding of your monetary situation and goals. Then, depending on the professional’s expertise, they’ll assist with several areas of your finances, including planning for retirement, building an estate, or managing investments.

Financial Therapist (CFT-I)

This is a professional who is certified by the Financial Therapy Association to help allay clients’ fears and anxieties surrounding money. To become one, individuals must display expertise in financial therapy, planning, and general therapeutics by completing education requirements and passing an exam. These experts must also adhere to a fiduciary duty when they serve clients.

Retirement Income Certified Professional (RICP)

RICPs are financial professionals that specialize in assisting clients with retirement income planning. These experts receive their designation from The American College of Financial Services. Typically, they help with maximizing one’s income, such as through Social Security, annuities, and investments.

Investment Manager

These professionals offer both investment advice and portfolio management. Typically, this involves working with you in a discretionary or non-discretionary manner to select investments, monitor progress, and rebalance if necessary. Keep in mind that these advisors may not always work in a fiduciary capacity, so it’s important to be aware of the standards the person you hire follows.

Robo-Advisor

Robo-advisors are automated portfolio managers that use advanced algorithms and data science. They assist, usually in a discretionary capacity, with picking investments, monitoring progress, and rebalancing your portfolio. Most often, robo-advisors invest in low-cost securities, such as mutual funds and exchange-traded funds (ETFs).

In the United States, robo-advisors must register with the U.S. Securities and Exchange Commission as registered investment advisors (RIAs). This binds these services to a fiduciary duty, even if it’s a robot.

Wealth Manager

Wealth managers specialize in helping high-net-worth individuals build and maintain their portfolios. They’re also commonly adept at financial planning as it relates to clients with significant assets. To hire one, clients must be able to meet steep account minimums that often exceed $1,000,000.

Importance of Acronyms

After spending some time looking for a financial advisor, you might be wondering why all these acronyms matter to the average client. They’re primarily a testament to a professional’s experience, expertise, and commitment to upholding a high standard of ethics. Most certifications, such as CFP and CFA, have rigorous requirements to attain them, as well as strict ethical standards.

As mentioned, certifications indicate what a professional specializes in. So, if you’re looking for a specific service, their credentials are key. For example, if you’re a wealthy individual searching for an investment manager, hiring someone with a CFA designation would be wise, as they likely have the requisite knowledge and experience. The same goes for a CFP if you’re looking for a fiduciary financial planner.

The acronym next to someone’s name isn’t everything, however. It’s just as important that you respect and can get along with the person you work with. Advisor-client relationships often last for years or decades, so it’s key to find a high-quality person as well.  

Different Ways Advisors Charge Clients

Advisors typically charge clients in a fee-only or fee-based capacity. In the former, you’ll pay a flat rate for the services you require or a professional’s time (per hour or via a retainer). The latter is the same as fee-only, but it may also include a commission for products or investments they recommend.

How a financial advisor charges clients is important if you value working with a fiduciary. If a professional’s fee structure is fee-only, you can rest assured that there are minimal conflicts of interest. However, fee-based experts may charge commissions, which could result in recommendations for products or services that aren’t in your best interest.

How to Choose a Financial Advisor

Finding the right financial advisor for your needs might seem like a tough task at first; however, you can simplify your search by considering the right factors. Before you choose a professional to help you, ask yourself the following:

• What do I need from an advisor? It’s key to know exactly what you need from a professional, whether it be financial planning or wealth management. You should also think about your goals and when you’d like to reach them. This way, you’ll have an idea of what type of expert to meet with and will be able to communicate effectively during your consultation.
• Does this person have the right credentials? Be sure to consider a professional’s qualifications, including their expertise, experience, and designation.
• Is this person or the firm they’re working for a fiduciary? To find one, look for advisors with credentials like CFP, CFA, or ChFC. For firms, be sure they’re an RIA with the SEC. You can vet an individual or firm by using FINRA’s BrokerCheck or the SEC’s Investment Adviser Public Disclosure (IAPD) website.
• Do I get along with them? Getting along with your advisor is important. At your initial consultation, try to get to know them and see if there’s a rapport between the two of you. If not, it may be worth it to find someone else instead.

If you need help finding a professional in your area, we recommend using this free matching tool. Once there, you’ll need to fill out a short quiz regarding your current financial situation and goals. Then, it’ll pair you with up to three vetted fiduciary advisors near you.