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What Is The Difference Between A Financial Planner And Financial Advisor?

What Is The Difference Between A Financial Planner And Financial Advisor?

August 29, 2022

Financial Planner Vs. Financial Advisor

When an individual or family needs help managing their finances, they often turn to a professional for assistance. "Financial advisor" and "financial planner" are both specialists who help consumers manage their money, but knowing which one you need for what is critical.

While every financial planner is a kind of financial advisor, not every advisor is considered a financial planner. With more than 100 certifications available for financial advisors, each certification indicates a different line of expertise and specialty.

Unlike the legal or medical industry, practitioners have some flexibility in how they refer to themselves, except for industry certifications. Some certifications include a certified financial planner (CFP) and chartered financial analyst (CFA). That said, there is a very common difference between a financial advisor and a financial planner; financial advisors more commonly focus on investment management, while planners take a more holistic approach.

What Is A Financial Advisor?

A financial advisor refers to anyone who helps clients manage their money and financial assets. Advisors may specialize in a specific area such as investment management, estate planning, retirement planning, insurance, debt repayment, tax planning, or another aspect of the financial industry.

Often advisors work within certain income levels for clientele. For example, high-net-worth individuals may consider working with a private wealth manager, while someone working on getting out of debt may prefer the help of a financial counselor.

What Is A Financial Planner?

Like a financial counselor and a private wealth manager, a financial planner is a specific type of financial advisor, although they don't necessarily have to be one. A financial planner specializes in planning by creating a comprehensive plan that helps clients achieve long-term goals. In many cases, they also manage investments for the clients they serve.

Like a financial advisor, a financial planner will assess a client's current situation and recommend what to do to improve it. A financial planner may also have areas of expertise, such as retirement or education planning.

Key Differences To Look For

While the terms have similarities, a financial planner can be viewed as a type of financial advisor. In particular, a financial planner is a professional who helps individuals and organizations reach long-term financial goals through various strategies. These can include planning for retirement, education planning, saving for a home's down payment, and so on. A financial planner uses strategic portfolio allocation for investments with relatively long timelines, ensuring that expected returns and risk tolerances are balanced.

In contrast, a financial advisor is a more general term for somebody who may be involved in not only this type of planning but also in different areas of money management or financial products. Financial advisors may provide life insurance, real estate, or accounting services, help place short-term trades, or provide banking services.

Which One Is Right for Me?

Financial planners and advisors perform similar services but are most definitely not terms to be used interchangeably. There are specific reasons working with a planner might be best for your situation and others why an advisor is most appropriate. Knowing the difference between the two is essential to judge the better choice accurately.

Once you've decided between hiring a financial planner or a financial advisor, you're ready to begin your search. Ask about their training and qualifications, including certifications obtained. Check their references to make sure they're in good standing. An advisor should be capable and affordable as well as transparent and compatible with your needs.

Looking For A Financial Advisor?

Connect with Pathway Financial for all of your financial advisor questions, concerns, and services.

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