Do you call yourself an “adviser” or an “advisor”? Chances are, if you’re a Registered Investment Adviser, you call yourself an “adviser.” On the other hand, if you’re a broker, you probably refer to yourself as an “advisor.”
At least that appears to be the standard. Surprisingly, though, many practitioners use both terms interchangeably.
According to Grammarist.com, “adviser and advisor are both accepted spellings of the noun meaning one who advises or counsels. There is no difference between them. But adviser, the older version, is listed as the primary spelling in most dictionaries, and it is about five times as common as advisor in current news publications from throughout the English-speaking world.”
For those more old school, the Oxford Dictionary says: “The spellings adviser and advisor are both correct. Adviser is more common, but advisor is also widely used, especially in North America. Adviser may be seen as less formal, while advisor often suggests an official position.”
When it comes to legal definitions, however, a vowel can mean a lot. The official U.S. Government document that defines and regulates the provision of investment advice is titled the “Investment Advisers Act of 1940.”
Notice the spelling of the term.
Not all aspects of financial planning and financial advice require providing investment advice. For instance, such staid examples as budgeting, debt management and insurance coverage generally fall outside the realm of investments. Certainly these professionals are not providing investment advice. Why invite potential compliance headaches by calling these people “advisers?”
Enter the word “advisor.” Not that using the word “advisor” makes anything less confusing to the public. It only alleviates the compliance concern. The SEC doesn’t care if you call yourself “adviser,” “advisor” or “consultant.” If you provide investment advice you will be regulated like an “Investment Adviser.” In other words, in terms of compliance regimen, the SEC will classify you as an “adviser.”
Is it possible to solve this confusion? Probably not by forcing the correct use of the term “adviser.” That train has long left the station. Fortunately, the Investment Advisers Act of 1940 may provide the definitive answer.
“It shall be unlawful for any person registered under section 203 of this title to represent that he is an investment counselor to use the name ‘‘investment counsel’’ as descriptive of his business unless (1) his or its principal business consists of acting as investment adviser, and (2) a substantial part of his or its business consists of rendering investment supervisory services.”
From now on, maybe we should require everyone offering investment advice to call themselves “investment counsel.”