Advisors
Financial advisor vs. financial planner
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“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
BLUEPRINT
Published 7:43 a.m. UTC April 17, 2024
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Key points
- A financial advisor manages a client’s investment portfolio.
- A financial planner provides more comprehensive financial services.
- Look for an advisor or planner who is a fiduciary.
There may come a time when your financial situation becomes too complex to manage on your own. That’s where financial advisors and financial planners come in. The terms are sometimes used interchangeably. But these professionals generally offer different services.
“Historically, financial advisors have focused more on portfolio construction and capital markets. Financial planners have focused more around the specialty areas of planning,” said Matt Sampson, a certified financial planner and senior investment advisor with Arnerich Massena.
Whether you’re looking for a financial planner or a financial advisor, your objective is the same. You want to find an experienced and skilled professional to guide your financial decisions in your best interests.
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What is a financial advisor?
Simply put, a financial advisor advises you on your finances. This broad term includes investment advisors, insurance agents, stockbrokers, financial planners and other professionals.
Financial advisors help you set financial goals and then create road maps to meet those goals. These road maps often include recommendations for financial products and help manage your portfolio.
Financial advisors can advise you on many aspects of your financial situation. But they often focus on one area, such as investing or insurance.
A financial advisor’s responsibilities may include:
- Analyzing your financial situation.
- Learning about your risk tolerance and capacity.
- Researching financial products for you.
- Recommending the best financial products based on your needs.
- Managing and monitoring your investment portfolio.
- Adjusting your portfolio based on the market and changes in your financial situation or goals.
What is a financial planner?
Like advisors, financial planners can help you set and reach investment goals by recommending financial products. They can also manage your portfolio. But their services usually extend far beyond that.
“A financial planner is nearly always a financial advisor too. But not all financial advisors are financial planners,” said Gordon Ross, a managing director with Dynasty Financial Partners. “It takes a certain skill set and qualifications to become a financial planner.”
A financial planner will usually take a holistic look at your financial picture. This can include reviewing your cash flow, investments, insurance, retirement and taxes. The advisor will then help you develop a financial plan to get from where you are today to where you want to be in the future.
A planner may execute certain aspects of a financial plan like an advisor would. But planners are more likely to outsource aspects of your plan. They may have you consult other professionals, such as insurance agents or estate planning attorneys.
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Do I need a financial advisor or a financial planner?
“Throughout your life, your needs and challenges will evolve,” Ross said. “Early in your career, it is important to ensure you are saving enough for retirement. Then, if you start a family, you will want to make sure you are saving properly for college. Closer to retirement, you want to make sure you have the right strategy to fund your lifestyle in retirement.”
Here are some situations where you may want to hire either a financial advisor or a financial planner.
The illustration above gives a rough idea of whether a financial advisor or financial planner is right for a certain situation. But there’s plenty of overlap. Most financial planners also offer advisory services. And many advisors provide financial planning services.
Generally speaking, there are some situations where a financial planner or advisor might be appropriate:
- You’re going through a major life change.
- You want to make sure you’re on track for retirement.
- Your financial situation has gotten more complex and you don’t feel comfortable managing it yourself.
- You want to ensure your investment strategy and products are right for your financial goals.
- You’re getting ready to retire and want someone to help you.
Differences between financial advisors and financial planners
It’s important to hire a financial professional who meets your needs.
Here are key differences between financial advisors and financial planners that can help you decide which is right for you.
Neither advisors nor planners are required to have specific certifications or education. But they often differ in terms of their certifications and expertise.
Financial advisors
Anyone can refer to themselves as a financial advisor. But financial advisors may need special certifications depending on the services they offer. For example, those who want to sell certain investment or insurance products may need to pass exams offered by the Financial Industry Regulatory Authority. And advisors with more than $100 million in assets must register with the Securities and Exchange Commission.
The fees financial advisors and planners charge vary widely. So you must understand ahead of time how much you’ll pay for services.
Fees may include hourly fees, flat fees, ongoing fees based on assets under management and commission-based fees. Commission-based fees are more common among advisors than planners.
Financial planners
Like financial advisors, financial planners don’t necessarily need particular certifications or education to refer to themselves as such. But they may be subject to the same requirements as advisors outlined above.
Many financial planners choose to earn the certified financial planner designation, which has education, exam, experience and ethics requirements. The CFP designation is considered the gold standard for financial professionals.
Should I hire both a financial advisor and a financial planner?
In most cases, you won’t need to hire a financial advisor and a financial planner.
Not all financial advisors are financial planners. But most planners are advisors (or have one on their team). So if you need a planner and an advisor, you can find an individual or firm specializing in both.
“It’s important for you to feel like whoever you choose to work with is a good listener. And (it) really takes the initial time upfront to get to know your goals, values and desires before implementing a plan,” said Alison Slezak, retirement planning advisor at Daniel A. White & Associates.
Ensure any advisor or planner you consider working with meets your needs. Financial professionals vary regarding their services and the type of clients they serve.
How to find a financial advisor or financial planner
After you decide whether a financial advisor or financial planner is right for your situation, it’s time to search for the perfect professional.
“The bar for calling oneself a financial advisor or planner is extremely low,” Sampson said. “But the bar to mastering financial planning specialty areas is high.”
It’s important to research carefully and vet professionals before working with them. Here are some sources you can turn to for help finding the right financial advisor or financial planner:
- Referrals from family or friends.
- The CFP Board’s Find Your CFP Professional.
- The Financial Planning Association’s PlannerSearch.
- The National Association of Personal Financial Advisors.
- FINRA’s BrokerCheck.
- The SEC’s Investment Adviser Public Disclosure website.
The search continues once you narrow your list of prospects to a few names. Titles aren’t necessarily as important as the skills and expertise a professional brings to the table.
Ask any advisor or planner if they are a fiduciary, which means they’re legally and ethically bound to act in your best interests. Not all advisors or planners are fiduciaries. But CFPs have a fiduciary duty to their clients.
Finally, look for an advisor or planner you feel comfortable who understands your goals. “At the end of the day, it’s your money and your future,” Slezak said. “Trust your gut.”
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Frequently asked questions (FAQs)
The amount you’ll pay for a financial advisor depends on several factors. These factors include the services you need and the advisor’s fee structure.
Some advisors charge a fee as a percentage of assets under management — 1% is common. Advisors who charge an hourly rate typically charge between $200 and $400 per hour.
The most significant downside of having a financial planner is the cost. Depending on the fee structure and the amount you have invested, you could pay hundreds of thousands — or even millions — of dollars in fees throughout your life.
Other potential downsides could arise if you hire an advisor who isn’t the right fit or has conflicts of interest and recommends products based on the commission they can earn rather than the best fit for you.
Paying for a financial planner can certainly be worth it. Financial advice is particularly impactful if your situation is complex or you’re nearing a major life milestone.
But guidance can be a worthwhile investment at any life stage. Consider hiring a financial planner If you’re uncertain about your finances. Having an expert by your side can make all the difference in your financial journey.
You don’t need to be certified to be a financial planner. But you do need to be certified to call yourself by a specific designation, such as a certified financial planner. You also need to hold certain licenses from FINRA to sell certain investment products.
A financial planner can be a wealth manager and vice versa. But they aren’t the same. Wealth managers generally work with high-net-worth individuals. Financial planners work with all ranges of the wealth spectrum.
The more you tell your financial advisor, the better equipped they’ll be to help you. Being candid about your income, expenses and other financial obligations is essential.
You should also share any potential risks to your financial security, such as if you have a financially unstable relative. Take your time detailing your financial goals, big and small.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
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