The inability to spot the difference between a financial planner vs advisor has made a lot of people confuse one for the other. However, you will learn the differences between a financial planner vs advisor as you read on.
A financial planner and a financial advisor are different careers and sometimes we use them in the wrong context.
The common thing between both professionals is that they are there to help their clients with their financial life.
A financial advisor focuses more on investments and assets management while a financial planner works with the client’s general financial life.
A quick description of the two professions is that a financial planner is a kind financial advisor but it is not so for a financial advisor.
The services offered by these professionals overlap at some point in the sense that you can find some financial advisors that also offer financial planning services.
Another clear distinction is that a financial advisor is balanced between investment and financial planning but a financial planner is little or not investment-minded.
This should have given you a perspective already. Now, let us begin on this topic. See the table of content below.
Financial Planner vs Advisor: Who is a Financial Advisor?
A financial advisor is a finance professional who guides clients on their investments, money management, and assets.
Anyone could call themselves a financial advisor but the distinguishing difference between such people and the real experts in the field is the professional certification they hold.
A financial advisor can also be regarded as a Chartered Financial Consultant (ChFC), portfolio manager, wealth advisor, investment/asset manager, and broker.
Expert financial advisors go through rigorous training processes and must pass the required tests to be licensed.
In countries like the United States of America, they will be required to register with the United States Security Exchange Commission. However, this is determined by the kind and number of assets they manage.
This is one article you need to read: HOW TO START A FINANCIAL ADVISOR BUSINESS
Financial Consultant vs Financial Advisor: What are the Roles of a Financial Advisor?
According to the U.S. Bureau of Labor Statistics (BLS), the roles of a financial advisor are as follows:
- Financial advisors communicate to their clients concerning investment opportunities as well as the risks involved in the investments they are about to embark on.
- They constantly make research about available investment options.
- They recommend specific investments to suit clients’ financial goals.
- Advice clients on the investments that fit their financial goals.
- Constantly check their clients’ accounts and make adjustments according to the clients’ needs.
- The most important role of a financial advisor is to keep check of their clients’ investments and regularly give financial investment reports to their clients.
- They meet with their clients from time to time to discuss investment techniques concerning the financial market situation or client’s financial changes.
Who is a Financial Planner?
A financial planner is a professional who works with clients to help them plan and meet specific kinds of financial goals.
These financial plans include retirement plans, insurance plans, taxes, etc.
Financial planners holding the Certified Financial Planner (CFP) certification are the ones recognized as professionals in the field.
What are the Roles of a Financial Planner?
Financial planners work with their clients’ general financial life and help them plan and manage their finances according to specific goals.
Below are the roles of a financial planner;
- Certified financial planners serve as both financial planners and financial advisors to their clients.
- They provide assets management services and financial plans like retirement plans, insurance plans, taxes, etc to their clients.
- They work closely with clients to plan major events in their lives. Such events include retirement, education, wedding, etc.
- Oversee their clients’ investments to ensure it fits into their financial goals and budget.
- Assess the financial condition of their clients with a holistic approach.
Now that you’ve understood the roles in financial advisor vs financial planner, check out the 20 Best Financial Advisors 2022
Financial Planner vs Financial Advisor: What’s the Difference?
Financial planners are experts who help individuals or companies to create a strategy to achieve their long-term goals. They can come from backgrounds like insurance brokers, accountants, etc.
A financial planner helps you plan your budgets, investments, pension, and savings. Their certification are either from certified Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), or any other association.
These certifications show that the financial planner has gone through the required experiences and has the necessary certification that qualifies him as a financial planner.
A financial advisor on the other hand is a professional who focuses on assisting individuals or organizations with managing and making decisions with their funds, insurance, tax, savings, or their investment.
The job of a financial advisor is similar to that of a wealth manager and a counselor put together.
A financial planner and advisor are professional jobs that help you with different things such as investment, pension, savings, etc.
When it comes to their scope of work, a financial advisor is broad and general while a financial planner is detailed and comprehensive.
When it comes to their certification, a financial advisor needs a series of licenses while a financial planner needs a certified planner certification.
Financial Planner vs Advisor: Which is Best for You?
Both financial planners and financial advisors tackle financial problems but knowing the one that is best for you is dependent on the kind of financial need you have.
So, before you think about contacting a financial planner or financial advisor, ensure you figure out your financial need.
This will guide you in choosing the best fit for you. The scope of work of a financial planner is broader than that of a financial advisor.
While a financial planner focuses on your financial life in general and prepares financial plans to strategically help you meet your long-term and short-term goals, insurance, etc. A financial advisor just focuses on your investments and helps you build wealth.
Since anyone with any type of educational background (related or not related to finance) can easily tag themselves as financial planners, you may also want to make your choice based on certification.
There are registered organizations that professionally train financial planners and give them certifications to operate professionally as financial planners.
An example of such an organization is the Certified Financial Planner Board of Standards. Individuals who receive training by this organization receive a certification that qualifies them to work as finance professionals.
Individuals with the Certified Financial Planner certification are more recognized as professional financial planners as they have been through challenging exams and professional training to attain that certification.
Meanwhile, if your financial need requires a more general facet of your finance, you should hire a financial planner instead of a financial advisor.
A financial planner would see everything from a general standpoint and lay down financial plans to help you achieve your desired financial result.
You could ask around from family, friends, and colleagues to recommend a financial planner to you.
Another option is doing some online research before hiring.
Financial Planner Vs Financial Advisor Salary
You should first know the cost of hiring either a financial planner or financial advisor before hiring one. Knowing the cost at which you can hire one is necessary before hiring.
However, there’s no fixed cost for hiring the services of a financial planner or financial advisor but if you will be needing their financial services for the long-term or if the financial planner or financial advisor is usually compensated. It may be expensive.
How much does a financial advisor make? you may be wondering. Well, there’s no specific amount that a financial advisor makes, it all depends on their schedule of services with clients.
Meanwhile, there are three methods in which financial advisors receive payment but only one method is often easy to use.
These methods are: fee-based, fee-only, and by commission.
Fee-based
In this method, they receive pay through the revenue they get from the services they render and from the commission they get from the financial products they sell.
Fee-only
Here, financial advisors receive pay according to the services they render.
By commission
This set of financial advisors sell their products and services through another organization and earn a commission from the sales they make.
A lot of financial planners and financial advisors who render long-term services charge their clients according to the possessions in their care.
Depending on the type of financial plan, some financial planners and financial advisors’ rates could range between $1,500 and $2,500.
If it’s an hourly plan, you can charge between $300 to $500, and in a case where they render long-term financial services, you can charge some percentage of your possessions in their management.
See Also: Financial Advisor vs Wealth Manager: Overview, Difference, and Similarities
Frequently Asked Questions on Financial advisor vs financial planner
You can find a financial advisor by asking for recommendations from family and friends, through the internet, or professional recommendations. After which, you will have to make inquiries from the advisor concerning his experiences, and professional qualifications. With time, the financial advisor could even become friends with your family and would want to be involved in your financial decisions.
You need a financial advisor to help you with your investments and assets management. This finance professional who is committed to meeting your financial goals will help you build your financial plan, give you professional advice concerning your wealth and assets, manage your investments and wealth too.
This is where the difference between a financial planner vs advisor comes in. So, the financial advisor is a broad name that encompasses both financial planners, investment managers, etc. All certified financial planners are financial advisors but all financial advisors are not financial planners.
They are usually compensated or charge their clients a fee. It could be hourly, annually, or a flat rate. Advisors who sell financial products and services through other companies earn a commission from them too.
It takes nine months to acquire a financial advisor certification. After which, you can start working professionally as a financial advisor.
You need a financial planner to help you make short-term and long-term financial decisions. These professionals help you with investment plans and general financial management.
The service fee that these finance professionals charge differs depending on the services they render.
Conclusion
After reading the financial planner vs advisor difference, you can now figure out the one that best suits you depending on your financial needs. After receiving recommendations on the financial advisor or financial planner to hire, draft out a few of them.
Schedule an interview with each of them, ask them several questions regarding their qualifications, experiences, the structure of cost, their services and the strategies they use, the kind of clients they work with, and references to ensure they are credible enough to work with.
After doing all these, you can now choose the one that best fits what you want. If your first choice is the right fit for you, then good. But if not, you can let the person go and hire someone different. A great financial advisor and financial partner are highly responsible, transparent, and credible.
Between the financial planner and the financial advisor, one of them is more general while the other focuses on a particular area. The financial advisor is a broad name that covers both financial planners, investment managers, etc.
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