There isn’t any licensing for a financial advisor! This is a popular generic term that anyone can use.
The 1940 Investment Advisors Act established registered investment advisors (RIA). RIA's are required to always put their client's interests ahead of their own interests. Part of the requirements is that they have to very clearly reveal any conflicts of interest that may exist. That's why many RIA's, including our firm, prefer to eliminate investing related conflicts. RIA’s were the original financial advisors.
However, a little-known regulation called the "Merrill Lynch rule" exempts brokers who offer financial advice from registering as investment advisors, as long as the financial advice they provide is “solely incidental” to their business. Yes, it was the highly paid lobbyists employed by big profit-driven Wall Street firms that influenced our elected officials that put this in place. Thanks a lot!
This rule essentially allows anyone to call themselves a "financial advisor".
Then by law the Big Box brokerage/insurance firms must add the following fine print somewhere on the documents:Your account is a brokerage account and not an advisory account. Our interests may not always be the same as yours. Please ask us questions to make sure you understand your rights and our obligations to you, including the extent of our obligations to disclose conflicts of interest and to act in your best interest. We are paid both by you and, sometimes, by people who compensate us based on what you buy. Therefore, our profits and our salespersons’ compensation may vary by product and over time."
Our interests may not always be the same as yours?" Excuse me?!
Pretty clever, heh? This is today's financial services world and people are paying a lot for a little and often there is a weasel on the other side of the table. Most of these weasels don't even know themselves how the fees work and cannot describe in detail who is being paid what amount from your money.
DEMAND that any financial service provider reveal exactly what services you’re paying for. DEMAND that the person reveals their fiduciary status. If they are at all vague, DEMAND they put it in writing on their company letterhead signed by an officer of the company that they are acting as a fiduciary. Make them take you through the fine print. Of course, just because someone hasn't taken on that fiduciary role, that doesn’t mean the person is offering you bad advice. (But be very careful.)
Additionally - many service providers these days are “Dually Registered” - both an an RIA an and as an Broker. So, you don’t know which hat they’re wearing at any one time.