Financial Advisor vs. Financial Planner
A financial advisor is a finance professional that provides one or more of a broad range of money management services to clients. A financial planner is a finance professional that helps clients create personalized financial plans to achieve their long-term goals.
- Written By Marguerita M. Cheng, CFP®, CRPC®, RICP®
Marguerita M. Cheng, CFP®, CRPC®, RICP®
Marguerita M. Cheng, CFP®, CRPC®, RICP®, is the chief executive officer at Blue Ocean Global Wealth. As a Certified Financial Planner Board of Standards Ambassador, Marguerita educates the public, policymakers and media about the benefits of competent and ethical financial planning. She is a past spokesperson for the AARP Financial Freedom campaign.Read More
- Edited BySavannah Hanson
Senior Financial Editor
Savannah Hanson is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.Read More
- Financially Reviewed ByThomas J. Brock, CFA®, CPA
Thomas J. Brock, CFA®, CPA
Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.Read More
- Updated: March 22, 2023
- 8 min read time
- This page features 4 Cited Research Articles
- Edited By
- “Financial advisor” describes a broad category of finance professionals who provide a wide variety of money management services, while “financial planner” describes professionals who help clients create financial plans to achieve their long-term goals.
- The major differences between financial advisors and planners are the time horizon they work with and the scope of services they offer.
- The state of your finances, the specificity of your needs and the type of relationship you desire with your financial professional will determine if you need a financial advisor or planner.
Though only 35% of Americans have a financial advisor, the demand for financial advice is growing especially among millennials.
However, confusion often arises about the exact type of professional people seeking financial advice should hire, especially with different finance professionals brandishing different certifications.
For example, do they need a financial advisor or a financial planner? Is there even a meaningful difference between the two or are they just synonyms for the same finance professionals?
Amidst this confusion, it is possible for many to be discouraged and just continue to watch their finances spiral out of control.
To avoid this confusion, we will seek to bring some clarity by considering the differences and similarities between a financial advisor and a planner and the factors those seeking financial guidance must consider in choosing one or the other.
The terms financial advisor and financial planner are often used interchangeably. In my opinion, the former term is broader than the latter. All financial planners can be categorized as financial advisors, but not all financial advisors are financial planners.
What Is a Financial Advisor?
A financial advisor is a finance professional that helps people manage their money.
The term is a broad one that applies to a wide range of professionals that include stockbrokers (who help clients buy and sell securities), insurance agents (who help clients select and register for insurance plans), investment advisors (who create and execute investment strategies on behalf of their clients), estate planners (who create estate plans for their clients), wealth managers (who help high-net-worth individuals manage their money) and bankers (who also provide banking and investment advice).
Depending on the nature of the services they offer, financial advisors can charge an hourly rate (e.g., insurance agent), a flat fee (e.g., estate planners), and an annual fee based on assets under management (e.g., wealth managers and investment advisers). They can also earn commissions when clients purchase a financial product they suggest.
Requirements and Certifications
Most financial advisors have a Series 7 License, which is offered by the Financial Regulatory Authority (FINRA). Individuals who offer investment advisory services will also have a Series 65 License in addition to the Series 7 License.
Furthermore, most financial advisors will have certain professional certifications, depending on their area of expertise and the services they offer.
- Chartered Financial Analyst
- Chartered Financial Consultant
- Certified Investment Management Analyst
- Certified Insurance Counsellor
- Chartered Alternative Investment Analyst
- Certified Public Accountant, among others
- Purchasing and selling securities
- Creating and executing investment strategies
- Advising on banking and investment strategies
- Wealth management
- Choosing insurance plans
- Creating comprehensive estate plans
- Creating comprehensive retirement plans
What Is a Financial Planner?
A financial planner is a finance professional that creates financial plans that will help clients achieve their long-term financial goals (including retirement, college education, down payment for a property, asset transfer, among others).
Financial planners often work with clients in a more comprehensive fashion, down to key (and basic) personal finance habits like budgeting, saving, creating an emergency fund, debt management etc. Consequently, they create personalized financial plans that are more holistic and focused on the long term.
They also charge hourly or flat fees. Some financial planners can also provide investment advisory or wealth management services, thereby also charging annual fees that vary with assets under management.
In some rare cases, they also earn commissions from the products they propose to their clients.
Requirements and Certifications
Many financial planners (especially those who provide investment management) will also have a Series 7 as well as a Series 65 License.
The Certified Financial Planner™ certification is the most common among financial planners. However, many financial planners often have additional certifications.
The financial planner is primarily involved in helping clients put their finances in order so they can achieve their long-term financial goals.
- Budget preparation
- Debt management
- Advising on emergency funds
- Advising on saving vs. investing
- Creating a systematic investment plan to achieve specific goals.
- Helping to deal with major life changes like marriage, divorce, remarriage.
- Can also include investment management, among others.
Comparing Financial Advisors and Financial Planners
Now that we have given an overview of both terms, let’s consider their similarities and differences.
- Both Finance Professionals
- Both the financial advisor and the financial planner are finance professionals.
- Money Management
- Though their services may differ, they are both committed to helping clients make better money choices.
- The financial advisor and planner will typically have a Series 7 or/and a Series 65 license from FINRA.
- Financial advisors and planners charge an hourly fee, flat fee, annual management fee (in the case of planners who offer investment management) and commissions on recommended products.
- Though the CFP® certification is popular among financial planners, some advisors also have it. Financial planners also possess some of the other professional certifications and designations that advisors typically hold, such as CPA and CFA.
- Time Horizon
- Financial planners focus on the long-term financial goals of their clients. Therefore, they create personalized financial plans that will help them achieve those goals.
On the other hand, financial advisors often deal with specific short-term decisions – choosing among certain investment opportunities, selecting the right insurance plan, creating an estate plan, etc.
Consequently, financial planners often have a long-term (and more personal) relationship with their clients compared to a financial advisor who is often focused on specific transactions, decisions, and problems at key points.
- Financial planners often have a more comprehensive and holistic approach to their clients’ finances. This is why they deal with basic issues like budgeting, saving, and debt management, among others.
In contrast, financial advisors deal with clients who are looking to build, manage, and secure wealth.
Similarly, it is more common for financial planners to offer advisory services (like investment management) than for financial advisors to provide financial planning services.
- While financial advisors are more comfortable recommending products, they will earn commissions on, financial planners are more critical of the whole commission business.
When To Hire a Financial Advisor or Financial Planner
Now that we have considered the differences and similarities between a financial advisor and a planner, let’s conclude by considering the factors to consider before choosing one or the other.
State of Your Finances
If your finances are not yet in order — no budget, no emergency fund, plenty of bad debt, no financial plan — you are better off with a financial planner.
On the other hand, if you already have your finances in order and have a solid financial plan, you might not need a financial planner.
Specificity of Your Needs
If your needs are very specific, requiring no long-term relationship or continuous advice, a financial advisor might be a better option.
However, if you need someone to guide you on more generic personal financial management issues, a financial planner might be a more appropriate fit.
If you want someone that you can always reach out to at different stages in your financial journey (that is, someone that will grow with you as your financial life progresses), consider a financial planner.
If, on the other hand, you want someone who will work with you on specific issues and be done with it, a financial advisor will be a better fit.
Even after choosing between a financial advisor and a planner, you will still need to decide on which of the thousands of planners or advisors to work with.
- Be sure that the financial advisor has the relevant Series 7 and 65 license from the FINRA. If the financial planner provides investment management services, then you should inquire if they have these licenses.
- Experience and Expertise
- As with other professionals, be sure the financial advisor or planner you choose has the relevant experience and expertise. You can measure the latter by certifications and the former by the years they have spent in the business.
- More important than certificates and the number of years in the business is the reviews of those who have worked with them. Check online and offline reviews before choosing.
- If two advisors or planners offer the same level of experience and expertise, then it makes sense to choose the one with lower charges or a more convenient fee structure (e.g., some clients prefer a flat fee to an hourly rate).
- If your needs are ultra-specific, then go for an advisor or planner that is an expert provider of that service rather than a generic one.
One easy way to go about choosing an advisor or planner is to ask for recommendations from your family and friends. This will help you narrow the pool and you can then focus on those who have offered quality service to the people you know and trust.
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4 Cited Research Articles
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- Northwestern Mutual. (2022, July 27). The Majority of Americans Say Their Financial Planning Needs Improvement, But Only a Third Seek Professional Help. Retrieved from https://news.northwesternmutual.com/2022-07-27-The-Majority-of-Americans-Say-Their-Financial-Planning-Needs-Improvement,-But-Only-a-Third-Seek-Professional-Help
- CNBC. (2021, March 22). There’s an increased demand for financial advice. Are advisors up to the challenge? Retrieved from https://www.cnbc.com/2021/03/22/can-advisors-meet-the-ever-increasing-demand-for-financial-advice.html
- FINRA. (n.d.). Series 7 – General Securities Representative Exam. Retrieved from https://www.finra.org/registration-exams-ce/qualification-exams/series7
- FINRA. (n.d.). Series 65 – Uniform Investment Adviser Law Exam. Retrieved from https://www.finra.org/registration-exams-ce/qualification-exams/series65
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