Early in the 20th century a stock and bond broker's job title was "customer's man". Over the years Wall Street marketing managers have changed this moniker many times. Customer's men became registered representatives, and then account executives or account managers. Today they are known as either financial consultants or financial advisors. These advisors or consultants are registered with self regulatory organizations such as the NASD or the New York Stock Exchange. Despite the title used by the major Wall Street firms investors should understand that their role is unchanged. The financial consultant's job is that of securities salesperson on behalf of the brokerage firm. The only investment advise he is legally allowed and licenced to give must be incidental to his function as a salesperson. His standard of accountability is suitability. That is the investments that he recommends must be suitable to the client's risk tolerance and financial circumstances. His compensation is determined by the employing brokerage firm and the brokerage firm is his ultimate employer. To represent himself as a purveyor of investment advise for a fee, he must disclose in writing any potential conflicts of interest he may have and be a registered investment advisor as described below.
Registered investment advisors or investment managers are licensed and registered with the federal Securities and Exchange Commision or the Department of Corporations in the state in which he operates. Similarly, his role is to determine the client's risk tolerances and financial aspirations, but then he makes discretionary investment decisions on the client's behalf. The advisor is compensated by fees directly from the client; therefore, the client is the ultimate employer. This relationship also creates a much higher standard of accountability for the manager. His role becomes one of fiduciary trust, so client's assets are typically more prudently invested. Additionally, an advisor measures returns and gives quarterly results to the client This level of service and responsilbily has in the past been available to only the wealthiest of investors, but that is changing fast.
All investment securities involve risk. And regardless of what your investment professonal's designation. none can guarantee future returns. Retaining the help of an investment profesional is an important decision, so shop around, take your time, and ask a lot of questions.
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