Financial Advisor Vs. Financial Planner: What’s The Difference?

Finance and money management have a tendency to take on a mystical quality. While it’s true that it’s complex and there are (multiple) degrees that you can get, that doesn’t mean that every aspect of it is hard to understand.

Most people will eventually turn to someone for advice on how to manage their finances. If you’re looking for professional advice, then a financial advisor or financial planner is a good idea. However, you may be wondering which one to pick and if it even matters. Is a financial planner just another name for a financial advisor?

The short answer is NO. Financial advisors and financial planners aren’t the same. Many of them are going to have the same or similar certifications, but financial planners will likely have more education than financial advisors, and they will definitely have more certifications.

If you’re wondering which one to pick, the simple answer is that financial advisors usually work with clients short term to offer advice. Financial planners, on the other hand, work with their clients long-term, continuing to help plan out money management and investment strategies.

Key Takeaways:

What Is a Financial Advisor?

A financial advisor is a professional who advises clients on money management, investments, and saving for retirement. This is an extremely broad term that can include stockbrokers, insurance agents, estate planners, bankers, accountants, and money managers.

There are over 100 different certifications that a financial advisor can attain. However, if they’re working with the public, they are required to have a Series 65 license from the Financial Industry Regulatory Authority (FINRA).

That means that they have passed the Series 65 exam, more formally known as the Uniform Investment Adviser Law Examination, which proves that the testee understands the laws surrounding finance and investment, along with the pertinent regulations and ethical requirements.

Despite this, there are many types of financial advisors, as well as those who claim to be one without really having the proper credentials. It’s important to check to see what certifications a financial advisor has and what they mean before deciding to work with them.

As a rule, those who work with financial advisors will work with them on a shorter-term basis. It will be for helping with filing taxes, starting a business, or working out debt relief. They tend to charge by the hour, or a few will charge a flat fee for a certain service – such as filing taxes.

What Is a Financial Planner?

Financial planners are a specific type of financial advisor. They tend to be focused on long-term goals, such as saving for retirement or keeping up with investments. Often, they will work with clients over a long period of time, meeting up with them so often to keep up with their financial goals and planning.

There is a specific certification for financial planners, making them certified financial planners (CFP), much like a certified public accountant (CPA). However, it should be noted that despite this certification, there isn’t really a particular requirement to call oneself a financial planner. That means that it’s best to stick with those who have the CFP certification.

While most financial planners will charge hourly as financial advisors do, some will also make a commission on sales. This will particularly be true when it comes to investments, so it’s important to note whether or not your financial planner’s pay is commission based before making a decision on what to buy.

Most financial firms are going to have a CFP on their staff to work with long-term clients. Financial planners also aren’t limited to personal financial planning and will sometimes work with a bank, a firm, or a non-profit organization.

As with financial advisors, financial planners can have any number of specialties or certifications. These can include, but aren’t limited to, being a CFP, of course, but also a Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or Certified Investment Management Analyst (CIMA).

A properly certified financial planner is going to have more knowledge and experience than a financial advisor. All financial planners are financial advisors, but not all financial advisors are financial planners.

Financial Advisor vs. Financial Planner FAQ

1. Which is better: a financial advisor or a financial planner?

   A properly certified financial planner is going to be more knowledgeable and experienced than a financial advisor. However, if you’re looking for a short-term contract with a financial expert or are looking for a specific area of expertise, a financial advisor may end up being preferable.

2. When should I get a financial planner rather than a financial advisor?

   You should hire a financial planner rather than a financial advisor if you’re looking for long-term advice.

   This can also include wanting to know how your financial situation will change over the course of your life, wanting to know if you have enough money to retire, or if you need help managing debt or saving for a large expenditure, such as a college degree.

   However, a financial advisor may be more suitable if you’re looking for help with a specific strategy or question, want a second opinion, or are only looking for occasional guidance or a reality check.

3. How do I pick a financial planner or financial advisor?

   In order to pick a good, trustworthy financial advisor or financial planner, there are five major points to consider. First, make sure they’re licensed. Many people can call themselves financial advisors or financial planners without really having the proper knowledge or certifications.

   Second, check the certifications they have. Websites, such as the Certified Financial Planner Board, will tell you what the different certifications mean and confirm that they’re truly licensed.

   Third, it’s very important to know what you’re looking for. Finance is a complex and broad field, and there are many different areas of expertise. Find a planner or advisor that’s an expert in the field you’re looking for advice in.

   Fourth, you need to understand the confines of your relationship. It’s a professional one, and you should understand how they want to be compensated – do they work on commission, for instance – and what exactly they can do for you?

   Lastly, while they may be an expert in their field, they don’t know everything. You may want to ask the advice of more than one financial advisor or planner if you have questions on different areas.

   A good financial advisor will likely recommend other professionals if you want information beyond their area of expertise, but be ready to do your own research.

4. What’s the difference between a financial advisor and an investment advisor?

   The difference between a financial advisor and an investment advisor is their area of expertise. Investment advisors are focused entirely on investments and advising their clients on the best way to invest. Financial advisors, on the other hand, can be any number of financial experts, including stockbrokers, insurance agents, and bankers.

5. Is there a difference between a financial advisor and a financial adviser?

   There isn’t a difference between a financial advisor and a financial adviser, save for spelling. It’s mostly a matter of personal preference which way advisor should be spelled.

Author

Di Doherty

Di has been a writer for more than half her life. Most of her writing so far has been fiction, and she’s gotten short stories published in online magazines Kzine and Silver Blade, as well as a flash fiction piece in the Bookends review. Di graduated from Mary Baldwin College (now University) with a degree in Psychology and Sociology.