Many financial professionals are available to consumers, and all may be competing for their business. Individuals who help consumers manage their finances are known as “financial advisor” or “financial planner”.
While every financial planner can be considered a type of financial advisor, not all financial advisors are financial planners. A financial advisor may have more than 100 certifications.
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KEY TAKEAWAYS
- A financial planner assists individuals and companies in creating a plan to achieve their long-term financial goals.
- A financial advisor is a broad term that refers to those who manage your money, investments and other accounts.
- Many advisors and planners in the financial industry may do the same thing. Therefore, it is important to do your research before hiring someone to help you.
Financial Planner vs. Financial Advisor: An Overview
Most people who need help managing their finances will get it from a financial advisor.
It is important to fully understand the financial planning landscape before hiring a financial planner. The Financial Industry Regulatory Authority (FINRA) states that almost anyone can claim to have the title of a financial planner. They could be investment advisors or brokers, agents or practicing accountants or people with no financial credentials. Consumers should do their research before entrusting their money to any financial advisor. These terms have some differences.
Financial Planner
Financial planners are professionals who help individuals and companies create strategies to achieve their long-term financial goals. A financial planner will typically take a holistic approach to finances. They can help you plan your budget, save, invest, and retire. Many financial planners work in their practices, but they may also be employed by a bank, wealth management company, or non-profit.
A planner may specialize in taxes, investments, retirement planning, or estate planning. A financial planner might also hold multiple licenses and designations such as Certified Financial Planner, Chartered Financial Analyst, Chartered Financial Consultant, Chartered Financial Consultant, Chartered Financial Consultant (ChFC), Certified Investment Management Analyst (CIMA), and others. Each of these licenses requires that the financial planner complete a unique education, work history, and examination requirements.
Financial Advisor
This term refers to a professional who manages your money. The advisor is paid a fee, and they assist with any money-related task. Financial advisors (sometimes called “adviser”) can help with investments, brokerage the purchase and sale of stocks and funds, and create a comprehensive estate and tax plans. Depending on the services provided, the advisor may need a FINRA Series 65 license if they are working with the public. 2
As a general term, “financial advisor” includes subsets of financial advisor groups, such as stockbrokers and insurance agents, money mangers, estate planners, bankers, etc.
The comparison between a financial adviser and a financial planner can be viewed as a funnel with the financial advisor at the top. A financial planner, or a type of financial advisor, is an example of a financial planner.
The Key Differences
Although these terms are often used interchangeably, a financial advisor can also be considered a financial planner. A financial planner, in particular, is a professional that helps individuals and organizations to achieve their long-term financial goals. These goals can include retirement planning, college education for children, down payment for homes, etc. Financial planners use strategic portfolio allocation to ensure that investors with long-time horizons have the right mix of expected returns and risk tolerance.
On the other hand, a financial advisor is a broad term that refers to someone who can be involved in this type of planning and other aspects of money management or financial products. For example, they may provide financial services such as accounting, life insurance, and real estate. They also might help with short-term trades and/or banking accounts.
Take Note
A financial planner is a specialist financial advisor that most people will use to help them with money problems. 3
It’s crucial to research the credentials of any planner you are considering hiring to assist with your financial planning. This includes checking whether they are licensed and how long they have been in practice. Ask the planner about their training and qualifications, including whether they are certified in an estate or tax planning.
It is also important to know upfront how the financial advisor is paid and what you will receive in return. Is there a one-time fee or multiple fees for each investment change or plan upgrade?
It is important to determine if the products and services offered are right for your needs. This will help you ensure that the investment advice and investments meet your long-term financial goals.
When evaluating a financial advisor, you might consider creating a list. To ensure you receive the highest quality financial guidance, make sure to check the planner’s references and disciplinary records.
It is important to remember that the U.S. Department of Labor’s fiduciary rule requires all professionals to give retirement planning advice and create retirement plans to adhere to certain ethical and legal standards. 5
Are all financial planners financial advisors?
Yes, in a sense. Financial planners are a subset of financial advisors that focuses on reaching longer-term financial goals.
How do I find a trusted financial advisor or planner?
Ask your family, friends, and colleagues for suggestions. You might also want to inquire if your company manages a retirement program. Search the database of The National Association of Personal Financial Advisors 6
After you have their names, verify their reputations on Broker Check. Meet or speak with them before hiring.
Who can become a financial planner or advisor?
Planning is a career that requires no prior experience. However, you must pass the Financial Industry Regulatory Authority’s licensing exams if your job involves handling customer money. Various professional certifications such as the Certified Financial Planner and Chartered Financial Analyst designations will give you extensive knowledge in related fields.
