Not All Financial Advisors Are Equal

When you start looking for a financial advisor, you're likely to come across categories such as the following:

• Financial consultants

• Financial planners

• Money managers

• Personal financial specialists

So who's a mid-lifer to hire? In order to choose the type of advisor who will be able to do the best job for you, it's important to understand what each of those categories of financial advisors entails. Let's have a look.

Financial Planners

Financial planners can be anyone who offers financial advice or services. Many people use the terms financial planner and financial advisor interchangeably.

A financial planner, as the term implies, will help you come up with a financial plan. And she may or may not implement the plan, depending on your agreement. Some people prefer to execute their financial plans on their own, while others like to work closely with an advisor.

If you hire a financial planner, make sure you're familiar with her credentials. Qualifications can vary widely within this category of financial advisor, with some advisors having far more expertise and experience than others. The first question you should ask is whether or not the financial advisor is certified.

Certified Financial Planners

A certified financial planner, or CFP, has earned the Certified Financial Planning credential, which is a national certification. This is accomplished by completing a home-study course and passing a cumulative, 10-hour exam.

In order to qualify for certification, a person must have worked for three years in a financial area, such as banking, planning, or investments.

Once certified, CFPs are charged with keeping up with what's happening within the financial industry, and must take 30 hours of continuing education courses every two years. They also must promise to adhere to a prescribed code of ethics.

Financial Consultants

A financial consultant provides an overview of financial information and options in order to help you choose the products that will best meet your financial needs.

He may, for instance, describe to you in detail the advantages and disadvantages of different kinds of IRAs, or how much money you'll need in order to invest in a particular fund. He generally will not produce a financial plan for you, only offer information and advice.