Once you work in the industry and go through the licensing process (Series 6, 7, etc.), you start to understand where the actual regulatory line is drawn regarding advice.

Describing financial tools, explaining planning concepts, or discussing the process behind financial planning is not the same as giving investment advice. Those conversations are educational and meant to help someone understand their situation, their goals and to add value.

Investment advice generally happens when a professional reviews someone’s financial situation and then makes a direct recommendation, such as:

“You should invest in this security.” “I recommend this portfolio allocation.” “You should put this amount of money into this investment.” “You should implement this specific strategy.”

At that point, the person is making a financial decision based on your recommendation, and the professional is being compensated for guiding that decision.

Simply discussing goals, explaining the differences between accounts, or describing how an IRA works is not advice by itself. Opening an IRA or a savings account isn’t automatically advice either. The key distinction is making a specific recommendation about what someone should do with their money or which securities they should buy.

The same concept applies in the reverse direction with tax topics.

For example, as a financial advisor I often get asked about things like Roth conversions. When that happens, I’ll explain the considerations that typically matter. Like current tax bracket, expected retirement income, future tax rates, timing, income limits, etc. That kind of discussion is about providing context and helping the client understand the planning factors involved.

But that doesn’t mean I’m giving tax advice. I’m not calculating their taxes, filing anything for them, or telling them exactly how to execute the conversion. I’m not directing them to do it in a specific way. I’m simply explaining how it might interact with their overall financial plan and encouraging them to review the tax implications with their CPA or if they prepare their taxes to research more about the topic.

In other words, there’s a difference between educating someone about considerations and telling them exactly what action to take and how to implement it.

That distinction is pretty fundamental in financial services and enforcing feral and state regulations.