The investment industry is often amused by surveys of consumer knowledge that reveal that the average investor is confused by various terms and appellations, whose purpose is to inspire confidence and delineate the roles of “experts” within the investment field. Three-letter designations say much as to possible career paths in the industry, but the
general public is prone to misunderstanding these subtle differences. Broker/dealers, motivated more by the desire to sell securities for their own account, often blur these distinctions when claiming to be “financial advisers” for sales purposes.
Buyers should be more skeptical of who is looking out for their personal interests when salesmen attempt to sway their judgment process. Neither financial advisors, nor financial analysts are in the business of selling. Each professional
designation, “RIA”, “ChFC” or “CFA”, requires years of study, positive performance on specific examinations, and continuing education to keep current on investment themes and trends. Perhaps, the best way to frame the difference is to accept that financial planners or advisors work directly with the public on financial issues, while a financial
analyst works in a corporate environment to ensure his firm’s positive performance over time.
An investment advisor is often registered in some fashion with a domestic governmental body that oversees the exchange of securities and protects consumer rights. This type of advisor is required to act as a “fiduciary”, meaning that he must provide you with objective financial advice with your best interests in mind. He will not sell you securities
directly, but he will provide advice on prudent portfolio allocations between different types of securities and whether you have employed wise diversification criteria in your specific selections. Typically, a financial planner will also counsel you on preparing for the future, managing your estate, taking into account various tax regulations, and
insuring your assets for protection from risks that may occur over time.
A Chartered Financial Consultant will be versed in all financial management matters, possess above average communication skills, and enjoy working directly with the public as a personal consultant. His guidance is not limited to long-term investment decisions. He can also advise on more active management strategies in case you wish to trade
stocks or forex in Canada by laying out an appropriate training regimen before you attempt any high risk activity where adequate preparation is a must to mitigate risks.
Financial Analysts, on the other hand, follow a similar path to gain financial competency, but their analytical skills and abilities are geared more for dealing in a business environment, assisting their respective firms in maximizing profits, making general business decisions where money is involved, and helping to manage returns on pools of
asset classes that vary, depending on the nature of the business enterprise. A college degree focused on math and technical techniques and coupled with strenuous exam qualifications are necessarily more complex to support the needs of the corporate world.
Confusion arises when aggressive salesmen approach consumers with securities for sale. Terms and titles become “blurred” to satisfy a marketing agenda. Advice given in this context may not have the Buyer’s best interest at heart. Investors should maintain a level of caution, obtain detailed information on the proposal, and then in a separate meeting review the materials with their personal financial advisor.
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The investment industry has many professional designations, each designed to communicate a level of trust when dealing in financial matters. A financial planner is more a generalist, and a financial analyst is more a specialist at his craft. Many salesmen are something different, often “cloaking” their pitch in an air of respectability.