Individuals and couples in need of financial guidance often wonder what the difference is between a financial planner and a financial advisor, also known as an investment advisor. While both of these professionals can offer their expertise in managing and investing money, they’re each two different people. Knowing the difference between the terms financial planner and investment advisor can be important for a person’s or couple’s financial future. If they want and need to meet certain goals, it’s important they use the right person.
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What is a Financial Advisor?
A financial advisor is a professional who helps others manage their money. Financial advisors may specialize in retirement planning, estate planning, debt repayment, investment management. tax planning or related services in the financial industry. A financial advisor may hold certain certifications based on his or her area of expertise. For example, a financial advisor who purchases stocks and bonds or helps to manage investments must have a Series 65 security license.
A financial advisor who does financial consulting or financial planning may have the Chartered Financial Consultant or Certified Financial Planner certifications. Individuals who work as estate planners, accountants, financial agents, stockbrokers, bankers or investment advisors often refer to themselves as financial advisors.
What is a Financial Planner?
A financial planner is a trained professional who works with individuals, couples and companies to assist them in meeting their financial goals. They create a financial plan aimed at helping others save, invest and increase their money. Financial planners evaluate the client’s current financial situation and make recommendations that can help the client meet their financial goals.
A financial planner can work in a specialized area of financial planning but must hold licenses or certifications in these specific areas, such as tax planning, retirement planning, asset allocation, education planning and risk management. Financial planners generally always have the CFP credential. A financial planner is a financial advisor, but a financial advisor is not always a financial planner. A financial planner has a fiduciary responsibility to his or her client and always works in the client’s best interest.
Difference Between the Two
In addition to the differences already mentioned, there are four other differences between financial planner and investment advisor
- Type of Working Relationship – Financial advisors can recommend or sell financial products to the client without providing much detail. Financial planners have a legal requirement to educate the client on potential investments and must act in the client’s best interest.
- Education Requirements – Financial advisors are not required to have specific education or training, while a financial planner must have the CFP certification, which requires a bachelor’s degree and relevant work experience.
- Frequency of Meetings – Financial advisors may only meet with clients a couple of times. Financial planners and clients meet on an ongoing basis so they can stay updated on goals and results
- Cost – Financial advisors are usually paid in one of three ways: fee-based, fee-only or through a commission. Financial planners usually get paid a percentage based on the portfolio and are paid on an ongoing basis.
Whether a person is looking for individual financial advice or wanta help in making investments, it’s important they know what type of person they’re looking for, according to U.S. News & World Report. Knowing the difference between the titles financial planner and investment advisor can mean the difference in a person or couple’s financial goals being met.
