A Financial Advisor is any person who engages in the business of providing advice with respect to investing in Securities. As shown below, the Investment Advisers Act of 1940 provides the formal definition of Financial Advisor, which is also known as Investment Advisor.
INVESTMENT ADVISERS ACT OF 1940
“Investment adviser” means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include…
Advisor vs. Adviser
You might have noticed that this wiki is using “Advisor”, but the regulation uses “Adviser”. You say “tomato”, I say “Advisor”, as that is the more common usage.
Fee-only
Although “Financial Advisor” is sometimes used to refer to a Broker-Dealer, there is a distinction. Brokers are compensated via commissions, but Advisors are compensated via a percentage of the account value or via an hourly fee. Oh, if the distinction was just that simple! An Advisor can also be a Broker, allowing him to double dip on the fee side and commission side. Commission-based compensation is laden with conflicts of interest. Investment products that pay the highest commission are rarely the products that best serve the client. A “Fee-only” Advisor distinguishes himself from a Broker in that a Fee-only Advisor does not get compensated via commissions.
Robo-advisor
A Robo-Advisor is a specific kind of Online Financial Advisor that takes technology a step further by providing automated, algorithmic portfolio management. Robo-advisors usually only offer portfolio management and do not get involved in the more personal aspects of wealth management that are unique to each client.
