Certified Financial Advisors vs. Regular Advisors: What’s the Difference?

Selecting the right financial advisor is as important as choosing the right doctor. Just like you’d want the right treatment to stay healthy, you’d need your financial advisor to give you the right investment recommendations to fulfil your goals.

You may think all financial advisors are the same, but that’s not the case. Not everyone who tells you the right mutual fund or stock to buy can be a financial advisor. It’s important to know the difference between certified and regular financial advisors.

Also Read- Pros and Cons of Becoming a Financial Advisor

What Does a Certified Financial Advisor Do?

A Certified Financial Advisor is a professional qualified to provide financial planning services to individuals and organisations. A certified financial advisor can either have a CFA or CFP qualification or even both. These qualifications represent a high standard of ethics, adherence to regulations and rich expertise and experience in financial planning. These professionals can offer advice on various aspects like investment management, retirement planning, tax planning and estate planning.

Who is a Regular Financial Advisor?

Regular financial advisors may not hold any qualifications like CFA or CFP, but they may have experience and knowledge in financial planning. They may hold relevant short-term certifications from the National Institute of Securities Market (NISM). Regular financial advisors can also offer guidance on savings, budgeting, tax planning, insurance, etc. While they may not hold any formal qualifications, many of them possess a wealth of experience and a practical approach to financial management.

Also Read- Detailed Guide on CFA vs CFP & How to Choose the Best Course?

Certified Financial Advisor vs Regular Financial Advisors – Key Differences

• Regular Compliance & Ethical Standards

CFPs and CFAs are bound by strict regulatory requirements and a code of ethics. These qualified professionals may often adhere to fiduciary standards, putting their clients’ interests ahead of their own. This commitment helps build trust and assures clients of their advisors’ ethics and integrity.

While certified financial advisors adhere to general regulations, they may not always be subject to these stringent standards.

• Education Background

Certified Financial Advisors are required to pass tough exams of CFA and CFP. These full-fledged courses make them well-equipped to solve complex cases and provide the best services in the financial advisory space. Apart from that, they may also regularly take certification courses to upskill themselves.

In contrast, regular financial advisors may not have any formal qualifications. They may possess the rich experience and skills needed to excel in financial planning and investment space.

• Fee Structure

Certified financial advisors often work with a fee-based compensation model. This is also called the fiduciary model, which encourages the professional to give unbiased advice that is best aligned with the client’s needs. In a fee-only model, the advisor may charge an upfront fee or a certain percentage. They do not receive any commissions for selling products.

Regular financial advisors may operate on a commission-based model, where they may be incentivised to sell certain equity schemes or insurance policies to their clients. This often creates a conflict of interest as incentives influence their recommendations.

• Client Trust & Credibility

The tough qualifications and ethical standards associated with certified financial advisors often improve their credibility and trustworthiness in the eyes of their clients. Experienced investors with a sizable portfolio may prefer working with certified financial advisors. This is solely because of their commitment to fiduciary standards.

While regular financial advisors may also be trustworthy, they may need to put in extra effort to prove their reliability and competence.

• Growth Opportunities

Certified financial advisors often enjoy better growth opportunities because of their qualifications, skills and fiduciary standards. Their qualifications and ethical standards attract high-net-worth individuals or NRIs as people of these demographics find their services more reliable. Certified financial advisors are adept in various aspects of financial planning, hence, they can scale their business to include services like portfolio management.

On the other hand, regular financial advisors may find their growth opportunities limited by a lack of formal qualifications.

Also Read- Financial Advisor vs Financial Planner: What is the Difference?

Can Regular Financial Advisors Get Certified?

Yes. Even Regular Financial Advisors should upskill themselves and pursue certifications like CFP for their career growth. You can become a CFP in India in only 6-18 months. The actual course duration of CFP depends on the time you devote.

Achieving a CFP certification can open up substantial opportunities for growth. You can attract high-net-worth clients or also extend your services to build a lucrative, expansive business.

FAQs

How much does it cost to become a financial advisor?

The total cost of becoming a Certified Financial Planner (CFP) in India is estimated to be around INR 1.5 to 2 lakhs. This includes CFP training program fees, registration fees, exam module fees, final exam fees and annual CFP certification fees.

What is the average salary of a certified financial advisor in India?

A salaried certified financial advisor can earn 2-7 lakhs per annum depending on location, job profile and level of experience.