Last week we broke down Wall Street nerds, specifically investment analysts , and this week we’re continuing the party. Today, we’re getting all up in the investment advisor mix, explaining what they do and clarifying the difference between them and a financial advisor. 

At the most basic level, an investment advisor is any person or group that makes investment recommendations or conducts investment analysis in exchange for a fee. The investment advice can be through the management of actual clients’ money or recommendations written in a publication but should not include the stock advice you’ve received from your cousin, who has never bought a stock in his life and who sells insurance out of the back of his car.   

Investment advisors (IA’s) hold a license to give advice and an IA who manages enough money on behalf of clients to be registered with the  Securities and Exchange Commission (SEC)  is known as a  Registered Investment Advisor or RIA. 

Let’s be clear...an Investment advisor is not a financial advisor. IA’s have a fiduciary duty to act in the best interest of their clients. They are held to a higher standard. Let’s break down this example. Let’s say you are running a marathon...preferably in Lululemon . At the end of the race, someone can give you water or wine...let’s make that rosé! The investment advisor, because of her fiduciary responsibility must, by law, give you water because it’s the best thing for you. The financial advisor, however, is legally allowed to give you the rosé. The financial advisor can’t give you poison, that wouldn’t be suitable by any standard, but they don’t have to give you the water.

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