Formulate a Financial Plan

Know Your Net Worth

Manage & Minimize Debt

Accumulate Assets

Budget to Live Within Your Means

Understand Investing Basics

Plan for Retirement

Insure People & Property

Deal with Financial Advisors

Review Your Employment Contract

Make Plans for Your Estate

Make Good Decisions


To keep things simple, until this point in the book, I’ve used the word “advisor” generically to describe all financial service providers. The term “advisor” is not a formal one, however. Technically, an “Investment Advisor” or “Registered Investment Advisor (RIA)” refers to a company that is registered at the state or federal level for provision of investing services, while “Investment Adviser Representative (IAR)” refers to the individual employed by such companies to provide clients with investment advice.[1] Similarly, “Broker” refers to the company providing brokerage services while “Registered Representative” refers to the individual who works for a brokerage firm.

In practice, the people we refer to loosely as advisors perform a range of functions:


Investment Advisors

Investment advisors provide investment advice to clients. Based on indicators such as a client’s age, income, and risk preferences, they recommend purchases of financial products such as stocks, bonds, mutual funds, ETFs, and other investment alternatives.


Securities Brokers

Brokers execute financial transactions on behalf of clients. They typically buy and sell stocks and bonds, or funds of stocks and bonds, based on client instructions. Brokers are paid commissions.


Asset Managers

Asset managers construct and maintain investment portfolios. Their portfolios may be customized for specific clients or offered as mutual funds and ETFs to a broader client base.


Insurance Agents

Insurance agents sell insurance products, including: property and casualty, life, disability, long-term care, and health insurance. They may also sell annuities. Technically, the term “insurance agent” generally refers to a person who is employed by an insurance company, while an “insurance broker” is an independent professional who represents a client seeking insurance coverage.


Financial Planners

Financial planners take a comprehensive view of a client’s financial situation and develop a plan meant to achieve the client’s intended overall objectives. They may or may not execute that plan.


Historically, advisors adhered to these designated functions in mutually exclusive fashion: an investment advisor gave advice; an insurance agent sold insurance products; a broker executed trades; an asset manager managed funds; and a financial planner provided a plan. Over recent decades, however, the lines of distinction have blurred significantly.

For example:

  • Brokers once executed trades or sold insurance, but many now also provide advice about investment choices and may offer broader financial planning services. Brokers may also refer to themselves as financial consultants, financial advisors or investment consultants
  • Financial planners may provide a strategic plan, but may also be licensed to execute any elements of that plan, encompassing: debt management, investments, insurance products, college savings plans, retirement, estate, and tax planning

Advice from professionals offering multiple services skews in favor of their initial training or their employers’ primary industry. Thus, an insurance agent who holds himself out as a financial planner may lean more heavily on insurance products when recommending a financial plan to a client. A broker claiming to provide general investment advice may recommend a complex portfolio requiring numerous transactions, each of which earns him a commission. Either of these outcomes could be bad for you.

It helps if you know exactly which function(s) you need filled, allowing you to focus on finding an advisor with appropriate expertise.


[1] You may have noticed an apparent spelling inconsistency in my use of Advisor vs. Adviser. My preference is for the former (I blame my British mother). I use the latter whenever it is a formal designation, for example, when used by the Securities and Exchange Commission to designate a formal title or legal concept.