Many consumers are confused with the numerous and confusing titles financial advisers have. The good news is that you are not alone. The bad news is there is no way to differentiate between the good and the bad.
Currently, almost all representatives are actually salespersons in terms of job function. That is why consumers are not willing to pay for financial advice and in fact they should not be doing so. The Council for Estate Agents wisely selected the usage of the word ‘salespersons’ to mean the individual property agents. The financial industry will do well by regulating terminology properly.
Despite the majority of the financial advisers acting as salespersons, the industry uses many different titles to confuse the consumer. As a result, many consumers are unable to differentiate between those who are doing sales and those who are providing advisory service. To make it worst, the Financial Advisers Act (FAA) uses confusing legal terminologies. Naturally, with such confusion, any consumer would be worried that they could be paying fee to the wrong type of person! The following is a table which I compiled to reflect the current confusing situation:
| Terminology | Meaning under the Financial Advisers Act | The natural meaning in the English language | Reality |
|---|---|---|---|
| Financial adviser | Refers to a company providing services regulated under the FAA. | The individual providing financial advice. | A salesperson. |
| Financial advisory Firm | No such terminology. | Refers to a company. | The firm selling products from many manufacturers. |
| Financial adviser representative | The individual representing the financial adviser. | Bad English. | Consumer cannot understand this term as it is bad English. |
| Adviser | Unregulated term | The person who gives advice. | A salesperson. |
| Senior Adviser | Unregulated term | An experienced person who gives advice. | A salesperson. |
| Consultant | Unregulated term | A very experienced person who gives advice. | A salesperson. |
| Personal Wealth Consultant | Unregulated term | A very experienced person who gives advice. | A salesperson. |
| Financial planner | Unregulated term | A person who can do planning. | A salesperson. |
| Appointed Representative | The individual representing the financial adviser. | Appointed by who? Bad English. | Consumer cannot understand this term. |
| Life insurance broker | The firm selling life products from many insurers. | The individual who can source life insurance policies from many insurers. | No often used by the industry. |
| Life insurance broker representative | Refers to the individual representing the broker | Bad English. | Not used in the industry. |
| Independent Financial Adviser | The firm that does not receive commission for providing financial advice. | A freelance individual who does not work for any firm but can provide financial advice. | Although the term is regulated, it is not enforced. Almost all FA firm claims to be an ‘independent’ yet all receive commissions (I consider wrap fees as commissions). |
| Independent Financial Adviser Representative | The individual representing the independent financial adviser. | Very bad English. | Not used in the industry as the English is too horrific. |
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