The Role of Certified Financial Advisors (CFA)

A financial advisor or financial planner is someone who gives advice to customers based on his/her understanding of the financial consequences of various actions. In most countries, financial advisors have to complete certain formal training and be registered under a regulatory body to give advice to consumers. Financial advisers work for private individuals, large organisations and corporations. They help people plan their savings and investment portfolios and help them manage their money by providing advice on how to save and spend their money.

The term ‘fiduciary’ refers to a relationship between an advisor and a client. In Canada, financial advisors are required to hold a regulated professional licence, which can be obtained after three years of training from a qualified individual. In the United States, there is no regulatory requirement to hold a licence but most professional advisors hold at least CPA status. In both countries, an advisor must also comply with applicable laws, including the Rules of Conduct adopted by the American Bar Association and Rules of Securities Regulation adopted by the Securities and Exchange Commission. To become a registered professional financial advisor in Canada, one needs to obtain a non-accredited diploma from an educational institution approved by the provincial securities commissions.

An investment advisor can be a principal, a manager, a global financial planner or a self-employed consultant. In the United States, the only licenses required are those issued by the states and then only for six months. Principal financial planners work for firms or individuals on their own, managing and advising clients on how to invest their money. Global financial planners are generally employed by multinational companies and help them devise strategies to reduce their taxes by structuring their businesses so that they benefit primarily from tax breaks available to them. Self-employed financial planners do not work for any company, but help individuals and organisations plan and manage their finances.

A wide range of people get help from financial advisors. Business owners need help to organise their ventures. Investors, too, need someone to advise them on where to invest. Family planners help couples establish a tax-efficient estate planning strategy and help them keep track of their assets and liabilities. Insurance agents also commonly hire financial planners to help them create an estate plan and manage their investments. Public accountants work with individuals and corporations to help them get the best return on their investments.

The role of a financial advisor has changed over time. Prior to the age of television, the typical advisor was a real-estate agent who helped clients organise their finances. Today, many people rely on financial advisors because the internet has made it possible for virtually anyone to access investment advice and make informed decisions about their finances. Today’s economic environment has caused many people to have impairments on their personal and business finances. The role of a financial advisor has changed, as well, and has adapted to suit the needs of all sorts of people.

Under the law, financial advisors are required to have a fiduciary standard, which means they must act in the best interests of their clients. In the past, these professionals simply took the fees they recommended and in many cases did not do anything to help the client. However, the new regulations have forced certified financial planners and independent financial advisors to be more diligent in helping their clients to manage their money. Therefore, many certified financial planners and self-directed IRA providers are now being required to register with the Department of Labor and the SEC to maintain regulated status. This ensures that these professionals are following rules that are in line with the wishes of the government. This is important for anyone who wants to ensure that they are getting high quality advice that will benefit their future.