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Financial Advisor vs Financial Planner

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Managing your finances can be complicated. So when you send out an SOS signal, what type of professional do you prefer to have onboard? Financial advisors and financial planners are 2 common types of professionals that could serve as your life preserver.

What’s the difference between a financial planner and a financial advisor? Great question. Both can help you achieve your financial goals. But here’s how to decide which option fits your needs.

What is a Financial Advisor?

A financial advisor is a broad term for a professional who helps you manage your accounts and investments. It’s helpful to think of “financial advisor” as an umbrella term that includes many types of professionals. Generally, advisors analyze your personal finances and financial situation, then provide tailored advice to meet your specific financial goals. 

Financial advisors come from a variety of professional backgrounds and expertise. Advisors can be insurance agents, money managers, bankers or stockbrokers. Typically, financial advisors specialize in a particular area within the financial industry. 

They may help you:

  • Manage investments
  • Buy or sell stocks
  • Create tax plans
  • Help you plan for retirement 
  • Help you determine how to repay debt 

Depending on their area of specialization, advisors may hold a series of licenses, overseen by the Financial Industry Regulatory Authority (FINRA).

What is a Financial Planner?

A financial planner is a type of financial advisor who specializes in helping companies or individuals create comprehensive programs to meet long-term financial goals. Planners are a popular choice for individuals who need money help and have straightforward financial goals. Financial planners tend to specialize in a particular financial area and may hold various licenses based on their specialization. Commonly held licenses include: 

  • Certified Financial Planner (CFP)
  • Chartered Financial Analyst (CFA)
  • Chartered Financial Consultant (ChFC)
  • Certified Investment Management Analyst (CIMA)

In order to be a CFP, financial planners must pass rigorous exams and meet other requirements set forth by the CFP Board.

Is There a Difference Between a Financial Advisor and a Financial Planner?

Both financial advisors and financial planners help clients manage their investments and set financial goals. They can come from a variety of professional backgrounds, hold several professional licenses and belong to professional organizations. The cost of services for both financial advisors and financial planners can fluctuate greatly depending on their fee structure and the amount of service required. With all of their similarities, it can be difficult to distinguish the difference between a financial advisor and a financial planner. Understanding the difference between these can help you decide which professional you want on your team.

The main difference between advisors and planners is the specialized services each type of professional offers. Financial advisors are professionals who help clients manage their accounts and investments, both short and long term. Financial planners, on the other hand, specialize in helping individuals and companies make and meet long-term financial goals. 

Who Should Use a Financial Advisor? 

Financial advisors offer a range of services and advice. It’s important to clearly define what type of advice you’d like and discuss the advisor’s qualifications and experience in that area. If buying or selling stocks is one of the services your financial advisor will assist you with, then make sure that he or she holds a Series 65 license. A Series 65 license means that your advisor is qualified to give you investment advice and has passed the Uniform Investment Adviser Law Examination, overseen by FINRA.

Financial advisors can come from a variety of financial backgrounds so it’s also important to find out whether he or she is a fiduciary. A fiduciary is a financial advisor legally obligated to act in your best interest by the Securities and Exchange Commission (SEC).  

Who Should Use a Financial Planner?

Identify whether you’re after short term or long-term goals. You can use a financial planner to help you meet either long-term or short term goals. Find out whether a planner you’re considering is a certified financial planner (CFP). This designation means your planner has taken rigorous financial tests, completed intensive work experience and is beholden to the CFP’s Board of Standards code of professional conduct. Many CFPs are also fiduciaries.

How to Find a Financial Advisor 

Ask family, friends or colleagues in good financial standing for referrals. You can also reach out to professional organizations such as the National Association of Personal Financial Advisors (NAPFA) or look at the Accredited Financial Counselor website to find financial advisors in your area. You can also ask professionals in the field such as CPAs or bankers if they have any referrals or recommendations about professionals in the area.

Regardless of the route you take, clarify your financial goals and come up with a list of questions that will help you determine whether their services are a good fit for your financial needs. 

You can look up advisor credentials on the FINRA or CFP Board websites. Check for fiduciary status on the National Association of Certified Financial Fiduciaries (NACFF) website. Finally, make sure you have a clear understanding of what the costs are so that you can compare a particular advisor to other professionals in the field.

Get the Best Financial Advice for Your Needs

Managing your finances by yourself can sometimes feel like sailing into unknown waters. Bring a financial planner or financial advisor onboard to help you navigate the ins and outs of financial planning and create strategic plans to meet your financial goals. Identify your financial goals and do some research to see whether the services offered by a financial planner or financial advisor are a better fit for you.

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