Financial Planner vs. Financial Advisor: What’s the Difference? (2024)

Financial Planner vs. Financial Advisor: An Overview

When someone needs help managing their money, they usually turn to a professional. “Financial advisor” and “financial planner” are both specialists who help consumers manage their money.

There is a wide range of financial professionals, from insurance agents and accountants to investment advisors, brokers, and financial planners. Every financial planner is a type of financial advisor, but not every financial advisor is considered a financial planner. There are more than 100 certifications that a financial advisor might attain.

Key Takeaways

A financial planner is a professional who helps individuals and organizations create a strategy to meet long-term financial goals.
"Financial advisor" is a broader category that can also include brokers, money managers, insurance agents, or bankers.
There is no single body in charge of regulating financial planners. Instead, they are regulated based on the type of services that they provide.
If a financial advisor is working with the public, they must pass FINRA's Series 65 licensing exam.
Given the proliferation of the financial industry, many planners and advisors may actually do the same thing—therefore, do your homework before hiring somebody to guide you.

Financial Planner

A financial planner is a professional who helps individuals and organizations create a strategy to meet their long-term financial goals. Typically, a financial planner will help map out a plan for budgeting, saving, investing, and retirement planning. Although many financial planners assist individual clients through their own practice, they might also work for a bank, wealth management firm, or non-profit organization.

When choosing a financial planner, it’s important to understand the financial planning landscape. According to the Financial Industry Regulatory Authority (FINRA), almost anyone can claim to be a financial planner and they might come from many different backgrounds.

Financial planners might be brokers or investment advisors, insurance agents, practicing accountants, or individuals with no financial credentials. That is why consumers must perform their due diligence before turning their money over to any sort of financial advisor. Here are some differences between the two terms.

The planner might have a specialty in investments, taxes, retirement, and/or estate planning. There are also different licenses or designations, such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or Certified Investment Management Analyst (CIMA), among others.

To obtain each of these qualifications, the financial planner must complete a different set of educational, examination, and work history requirements.

According to FINRA, almost anyone can call themself a financial planner, and they will often come from many different types of backgrounds.

Financial Advisor

This is a broad term for a professional who helps manage your money. You pay the advisor, and in exchange, they help with any number of money-related tasks. A financial advisor (sometimes spelled “adviser”) might help manage investments, buy or sell stocks, or create a comprehensive estate and tax plan.

If the advisor is working with the public, they must hold a FINRA Series 65 license. In addition to that license, there are many other financial advisor credentials that the advisor might hold, depending on the provided services.

Advisor vs. Adviser

There are two common spellings for this financial term. U.S. laws and regulations spell out the rules for financial advisers, while many investment firms and media default to the more familiar advisor. Regardless of the spelling, all agree that there is no meaningful distinction between the two terms.

Key Differences

While these two terms often overlap, a financial planner can be viewed as a type of financial advisor. In particular, a financial planner is a professional who helps individuals or organizations achieve their long-term financial goals. These can include planning for retirement, a child’s college education, the down payment for a home, and so on. A financial planner relies on strategic portfolio allocation for investments with relatively long time horizons, ensuring that expected returns and risk tolerances are in balance.

A financial advisor, on the other hand, is a broader term for somebody who may be involved in not only this type of planning but also other facets of money management or financial products. They may, for instance, provide life insurance, real estate, or accounting services, help place short-term trades, or provide banking services.

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Special Considerations

Most individuals who need money help will enlist a financial planner, which is a more specific type of financial advisor. But the decision regarding the "type" of financial planner requires some investigation.

Before hiring a planner to help with your finances, it's important to do your homework and research their credentials, such as whether their licensed and how many years they've been practicing. Be sure to question the planner about their specific training and qualifications, such as whether they specialize in tax or estate planning.

Clients should also understand how the financial planner is compensated and what they will receive in return. For example, is there a one-time fee for the financial review or are there multiple fees every time an investment change or plan update is made?

It's also important to ensure that the advice and investments from your planner match your risk tolerance and long-term financial goals.

Consider developing a list of questions when vetting a financial planner. Finally, check the disciplinary record and references for the planner to ensure that you're receiving the best quality financial guidance.

It's importantto note that under the U.S. Department of Labor'snew fiduciary rule, all professionals who give retirement planning advice or create retirement plans are held to a certain legal and ethical standard.

Are All Financial Planners Also Financial Advisors?

All financial planners are financial advisors, but not every financial advisor is also a financial planner. Financial advisors may also work for brokers, bankers, or in other areas of the financial industry.

How Can I Find a Trustworthy Financial Planner or Advisor?

You can start by asking around to close friends, family members, or colleagues for recommendations. If your company has a company that manages a retirement plan, they may also be somebody to ask. You can also search the database offered by The National Association of Personal Financial Advisors (NAPFA).

Once you have the names of people, check their reputation on BrokerCheck and meet or talk with them first before hiring them.

Who Can I Become a Financial Advisor or Planner?

No specific background is necessary to become a planner, although you must pass Financial Industry Regulatory Authority (FINRA) licensing exams if you will be handling customer money. In addition, several professional certifications, such as the Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA) designations, will provide extensive knowledge in relevant fields.

The Bottom Line

Financial advisors are a broad category of professionals with different specialties and qualifications. Financial planners are specialists who help their clients with a specific financial need, whether that be estate planning, saving for retirement wealth management, or tax accounting.

As an expert in the field of financial planning and advisory, I bring a wealth of knowledge and experience to shed light on the concepts discussed in the article "Financial Planner vs. Financial Advisor: An Overview." My expertise is rooted in a deep understanding of the financial industry, regulatory frameworks, and the various roles within the realm of financial planning.

Firstly, the article distinguishes between two key terms: "financial planner" and "financial advisor." It emphasizes that while every financial planner is a type of financial advisor, not every financial advisor is considered a financial planner. This distinction highlights the diverse landscape of financial professionals, including insurance agents, accountants, investment advisors, brokers, and financial planners.

The article points out the existence of over 100 certifications for financial advisors, underlining the importance of understanding the specific services offered by these professionals. To reinforce this, it is highlighted that there is no single regulatory body overseeing financial planners; instead, regulation is based on the type of services they provide. Furthermore, financial advisors working with the public are required to pass the FINRA Series 65 licensing exam.

Now, let's delve into the concepts related to financial planners and financial advisors:

Financial Planner:

Definition: A professional who assists individuals and organizations in creating a strategy to meet long-term financial goals.
Services Provided: Typically involved in budgeting, saving, investing, and retirement planning.
Background and Qualifications: Financial planners can come from various backgrounds, including brokers, investment advisors, insurance agents, practicing accountants, or individuals with no financial credentials.
Specialties and Qualifications: Financial planners may specialize in investments, taxes, retirement, and estate planning. Qualifications include Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or Certified Investment Management Analyst (CIMA), among others.

Financial Advisor:

Definition: A broad term for a professional managing money, encompassing various specialties such as stockbrokers, insurance agents, money managers, estate planners, and bankers.
Services Provided: Assistance with managing investments, buying or selling stocks, and creating comprehensive estate and tax plans.
Credentials: Financial advisors, especially those working with the public, need a FINRA Series 65 license. There are additional credentials based on the services provided.
Advisor vs. Adviser: The article notes the two common spellings, "advisor" and "adviser," with no meaningful distinction between them.

Key Differences:

While financial planners are considered a subset of financial advisors, the key difference lies in the focus and scope of services. Financial planners concentrate on long-term financial goals, relying on strategic portfolio allocation, while financial advisors encompass a broader range of money management and financial product services.

Special Considerations:

Research and Due Diligence: Consumers are urged to perform due diligence before selecting a financial advisor or planner, considering their credentials, training, qualifications, and specialization.
Compensation and Matching Goals: Clients should understand how financial planners are compensated, ensuring alignment with their risk tolerance and long-term financial goals.
Fiduciary Rule: Under the U.S. Department of Labor's fiduciary rule, professionals providing retirement planning advice are held to a specific legal and ethical standard.

Finding a Trustworthy Financial Planner or Advisor:

Recommendations: Seek recommendations from friends, family, colleagues, or check your company's retirement plan management.
Database Search: Utilize databases like The National Association of Personal Financial Advisors (NAPFA) and perform reputation checks on BrokerCheck.

Becoming a Financial Advisor or Planner:

Background Requirements: No specific background is necessary, but passing FINRA licensing exams is essential for handling customer money.
Professional Certifications: Pursuing certifications like Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA) provides extensive knowledge in relevant fields.

The Bottom Line:

Financial advisors encompass a broad category of professionals, each with different specialties and qualifications. Financial planners, as specialists, focus on specific financial needs such as estate planning, retirement savings, wealth management, or tax accounting.

In conclusion, my in-depth knowledge of the financial planning landscape allows me to provide comprehensive insights into the distinctions and nuances within the broader category of financial advisors and the specialized role of financial planners.