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Financial Planner vs. Financial Advisor: An Overview
Someone who needs help managing their money usually turns to a professional. “Financial advisor” and “financial planner” are both specialists who help consumers manage their funds.
A wide range of financial professionals can offer assistance, from insurance agents and accountants to investment advisors, brokers, and financial planners. Every financial planner is a type of financial advisor but not every financial advisor is considered a financial planner. Financial advisors can attain more than 100 certifications.
Key Takeaways
- A financial planner is a professional who helps individuals and organizations create a strategy to meet long-term financial goals.
- “Financial advisor” is a broader category that can include brokers, money managers, insurance agents, or bankers.
- No single body is in charge of regulating financial planners. They’re regulated based on the type of services they provide.
- A financial advisor must pass the Series 65 licensing exam if they’re working with the public.
- Many planners and advisors may perform the same services given the proliferation of the financial industry so do your homework before hiring someone to guide you.
Financial Planner
A financial planner is a professional who helps individuals and organizations create strategies to meet their long-term financial goals. A financial planner will typically help map out a plan for budgeting, saving, investing, and retirement planning. Many financial planners assist individual clients through their own practices but they might also work for banks, wealth management firms, or non-profit organizations.
It’s important to understand the financial planning landscape when choosing a financial planner. Almost anyone can claim to be a financial planner and they might come from many backgrounds, according to the Financial Industry Regulatory Authority (FINRA).
Financial planners might be brokers or investment advisors, insurance agents, practicing accountants, or individuals with no financial credentials. A planner might have a specialty in investments, taxes, retirement, and/or estate planning. Various licenses or designations are also available such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or Certified Investment Management Analyst (CIMA).
The financial planner must complete educational, examination, and work history requirements to obtain each of these qualifications.
Almost anyone can call themself a financial planner and they’ll often come from many types of backgrounds, according to FINRA.
Financial Advisor
This is a broad term for a professional who helps manage your money. You pay the advisor and they’ll help with any number of money-related tasks in exchange. A financial advisor might help manage investments, buy or sell stocks, or create a comprehensive estate and tax plan.
An advisor must hold a North American Securities Administrators Association Series 65 license that’s administered by FINRA if they’re working with the public. A financial advisor might hold many other credentials in addition to this license depending on the services provided.
The term “financial advisor” includes many types of professionals such as stockbrokers, insurance agents, money managers, estate planners, and bankers. An investment advisor is a type of financial advisor who specializes in securities.
Advisor vs. Adviser
There are two common spellings for this financial term. U.S. laws and regulations spell out the rules for financial “advisers.” Many investment firms and media default to the more familiar “advisor.” All agree that there’s no meaningful distinction between the two terms regardless of the spelling.
Key Differences
These two terms often overlap but a financial planner can be viewed as a type of financial advisor.
A financial planner is a professional who helps individuals or organizations achieve their long-term financial goals. These can include planning for retirement, a child’s college education, or the down payment for a home. A financial planner relies on strategic portfolio allocation for investments with relatively long-term horizons, ensuring that expected returns and risk tolerances are in balance.
The term financial advisor is broader. It defines someone who may be involved in not only this type of planning but also in other facets of money management or financial products. They may provide life insurance, real estate, or accounting services. They might help place short-term trades or provide banking services.
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Special Considerations
Most individuals who need money help will enlist a financial planner which is a more specific type of financial advisor. The decision regarding the “type” of financial planner requires some investigation, however.
It’s important to do your homework and research their credentials before hiring a planner to help with your finances. Are they licensed? How many years have they been practicing? Question the planner about their specific training and qualifications such as whether they specialize in tax or estate planning.
Clients should also understand how the financial planner is compensated and what they’ll receive in return for their money. Is there a one-time fee for a financial review or are there multiple fees every time an investment change or plan update is made? It’s also important to ensure that the advice and investments from your planner match your risk tolerance and long-term financial goals.
Consider developing a list of questions when vetting a financial planner. Check the disciplinary record and references for the planner to ensure that you’re receiving the best quality financial guidance.
All professionals who give retirement planning advice or create retirement plans are held to a certain legal and ethical standard under the U.S. Department of Labor’s fiduciary rule.
Are All Financial Planners Also Financial Advisors?
All financial planners are financial advisors but not every financial advisor is a financial planner. Financial advisors may also work for brokers, bankers, or in other areas of the financial industry.
How Can I Find a Trustworthy Financial Planner or Advisor?
Start by asking close friends, family members, or colleagues for recommendations. Find out if your company has a firm that manages a retirement plan. They may also be somebody to ask. You can also search the database offered by The National Association of Personal Financial Advisors (NAPFA).
Check their reputations on BrokerCheck after you have the names of potential planners and/or advisors. Meet or talk with them before hiring them
How Can I Become a Financial Advisor or Planner?
No specific background is necessary to become a planner although you must pass licensing exams if you’ll be handling customer money. Several professional certifications such as the Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA) designations will provide extensive knowledge in relevant fields.
The Bottom Line
Financial advisors are a broad category of professionals with different specialties and qualifications. Financial planners are specialists who help their clients with specific financial needs such as estate planning, saving for retirement wealth management, or tax accounting. Start your search for help by determining exactly the kind of assistance you need.
