When people seek out professional assistance for their finances, they are often met with many different professions that may fall under a similar umbrella. One of those challenges is distinguishing between a financial adviser and a stockbroker. While both professions are immersed in the world of finance, they serve the public in two very different roles.
Here's what you need to know:
A financial adviser
According to Investopedia, the definition of a financial adviser is a person who provides financial advice or guidance to customers for compensation, providing many different services that can include investment management, income tax preparation, estate and retirement planning.1 By assessing your financial situation, a financial adviser can help provide you with the best available options suited to your unique situation and goals.
There are many different qualifications and/or designations that an individual can have in order to hang out a shingle as a financial adviser. At a minimum, you should look for a financial adviser who has attained a Certified Financial Planner (CFP) designation. Why? Because a CFP designation requires a certification process that covers a wide range of financial disciplines that includes insurance, financial analysis, investment planning, tax management, retirement and estate planning- all rolled up in one professional package. So if you're looking for a professional who can help you with a multitude of life's financial planning challenges, a CFP is where the rubber meets the road.
A stockbroker is an individual who buys and sells stocks as well as other securities through a stock exchange or over the counter for a fee or commission. It's the role of the stockbroker to assess their client's risk tolerance, and to offer investment opportunities that may be beneficial. By continually monitoring the financial market, a stockbroker can be a credible source of knowledge to better gauge the performance of financial securities.
A stock broker may have several different designations based on the type of type of services they provide, the type of securities they sell, as well as the type of licenses they hold. A stockbroker in the U.S. who is looking to sell a full line of securities must have their Series 7 license under their belt, as well as the Series 63, Series 65 or Series 66 in order to be considered a licensed stockbroker.
Similarities of a financial adviser and a stockbroker
According to the Bureau of Labor Statistics, even though a financial planner might not specialize in the stock market, they may still licensed to buy stocks and trade them on behalf of their clients (this is dependent upon the individual client agreement).2 And since both professions work closely with their client's finances, you may find financial advisors and stockbrokers with similar higher educational credentials such as a degree in economics, mathematics, or a Master of Business Administration (MBA).