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Last Updated: Sep 2009
Last Updated: Sep 2009
In the United States of America, the NASD regulates and oversees the activities of more than 5,050 brokerage firms, approximately 172,050 branch offices and more than 663,050 registered securities representatives. A financial advisor or stock broker should be licensed to provide any consultation on investment in securities. Typical licenses needed to promote the sale of stocks are the: Series 7 (stock broker exam), Series 63 (state exam), and Series 65 or 66 RIA Registered Investment Advisor Law exam. Generally, any advisor who charges a fee for investment advise would need to also have the Series 65 or 66 license. Thus, anyone can call themselves a financial planner but they would still need NASD licenses to provide advice for a fee or be registered as an investment advisor with the SEC Securities and Exchange Commission in the USA. Many brokerage firms still claim an exemption for their employees who sell fee based products and services.
Financial advisers may help their clients invest for both long and short term goals. It is the financial adviser's duty to determine the clients' goals and risk tolerance and then to recommend appropriate investments. The longer time horizon to achieve the goal, the more the adviser would be able recommend more volatile investments with potentially greater risks and rewards. Such investments include direct investment in stocks/shares or through collective investment schemes such as mutual funds, unit trusts or investment trusts.
If the client has shorter term goals, the adviser should recommend less volatile investments such as cash, Certificates of Deposit, and bonds. These types of investment generally have lower returns, but less volatile and there is less likelihood of losing the amount invested. This makes them more appropriate to guard against capital loss, but their value will be eroded by inflation over long periods of time.
Under UK polarisation rules the concept of the Independent Financial Adviser or IFA was born. To be independent of any insurer or other third party interest ensures the client receives unbiased advise. The non-independent advisers are therefore company representatives, and thus may have a conflict of interest.
If the client has shorter term goals, the adviser should recommend less volatile investments such as cash, Certificates of Deposit, and bonds. These types of investment generally have lower returns, but less volatile and there is less likelihood of losing the amount invested. This makes them more appropriate to guard against capital loss, but their value will be eroded by inflation over long periods of time.
Under UK polarisation rules the concept of the Independent Financial Adviser or IFA was born. To be independent of any insurer or other third party interest ensures the client receives unbiased advise. The non-independent advisers are therefore company representatives, and thus may have a conflict of interest.
