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An advisor (or adviser) is a person who gives advice. In the world of finance, there is some confusion about which spelling to use when referencing one. Thankfully, they’re both correct, though there is a slight difference between the terms.
Advisor or adviser?
In everyday language, advisor with an “o” and adviser with an “e” are essentially the same thing.
But the U.S. Investment Advisers Act of 1940 (the act that spells out what exactly an investment advisor is and requires them to register with a governing body) uses the spelling “adviser” with an “e.” Because of this, some financial advisors prefer to stick with the official language, while others like to spell it “advisor.”
The important takeaway for consumers: The spelling your finance professional uses has no bearing on their level of expertise. An advisor’s certification and the kind of financial advice they give is what matters — and it's up to you to vet them.
Regardless of their job title, a financial advisor who gives investment advice must register with either the U.S. Securities and Exchange Commission or their state. You should always verify a potential advisor’s registration status and any other certification they hold. You can vet an investment advisor’s background through the Financial Industry Regulatory Authority’s BrokerCheck, which offers information on both SEC- and state-registered investment advisors.
For advisors with a specialized certification, the individual licensing board’s website usually offers a way to vet members. For example, to verify a certified financial planner, you can use the tool on the CFP Board’s website.
What do advisors do?
Financial advisors can invest money for you, help you come up with a financial plan, assist with saving for retirement and other goals, and answer your financial questions. Making financial decisions can be stressful and emotional, and a good advisor should be able to help you see your choices clearly.
For example, let's say an advisor has a client who's in her 30s and has a 401(k) through her employer. After reviewing the client’s financial information, determining her risk tolerance and discussing her goals, the advisor might offer a recommendation for how much she should be contributing to her 401(k), how other retirement accounts, like an IRA, might factor into her plan and what investments she should choose. The advisor might then manage those investments across all of her accounts, making changes and rebalancing as needed. Alongside that, the advisor can offer a complete financial plan to help her reach her other goals — for example, guidance on how to save for a home down payment, how much house she can actually afford and what kind of insurance coverage she needs.
There are several kinds of advisors, but NerdWallet recommends working with CFPs. Advisors who have earned the CFP designation have several years of experience and are held to a fiduciary standard, meaning they are obligated to act in their client’s best interest.
» Want to know more? Read about the different types of financial advisors
Do I need an advisor?
If you struggle with managing your money or saving enough to meet your goals or you've recently had a major life event (perhaps you’ve received an inheritance, had a child or started combining finances after getting married), you could benefit from speaking with an advisor.
If an in-person, traditional financial advisor is out of your budget (you can find out about how much a financial advisor costs), robo-advisors and online financial planning services can provide similar assistance with a much smaller price tag.
Robo-advisors use a computer algorithm to choose and manage investments for you based on your risk tolerance and other financial details. Online planning services use similar algorithms for investment management, but also provide access to human advisors who can answer your financial questions or even provide a comprehensive financial plan.
» Need some help? Learn how to choose a financial advisor