Consumers are presented with a broad spectrum of investment professionals. Financial advisor and financial planner are popular titles for these individuals who help the consumer manage his or her money.

Following is a drill down to help distinguish what these popular titles really mean.

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 might help manage investments, broker the sale and purchase of stocks and funds or create a comprehensive estate and tax plan. If the advisor is working with the public, they must hold a Series 65 license. In addition to that license, there are many other financial advisor credentials the advisor might hold, depending upon the services that are provided. (For more, see: Shopping for a Financial Advisor.)

Financial advisor is a general term, subsets of the financial advisor group might include stock brokers, insurance agents, money managers, estate planners, bankers and more.

Think of the comparison between a financial advisor versus a financial planner like a funnel with the financial advisor on top. Continuing with this analogy of the funnel and going further down, a financial planner is a type of financial advisor.

Financial Planner

The financial planner is one type of financial advisor, who helps companies and individuals create a program to meet long-term financial goals.

The planner might have a specialty in investments, taxes, retirement, and/or estate planning. Further, the financial planner may hold various licenses or designations. 

For example, the Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC) and Certified Investment Management Analyst (CIMA) are a few of the designations a financial planner might hold. To obtain each of these licensures, the financial planner must complete a different set of education, examination, and work history requirements. (For more, see: Where Can I Look for a Financial Planner?)

Similarities and Differences

Every financial planner is also a type of financial advisor, but every financial advisor is not necessarily a financial planner. NAPFA, the National Association of Personal Financial Advisors, claim there are more than 100 certifications available that a financial advisor might attain.

In most cases, a consumer who seeks help managing their money will receive that help from a financial advisor of some sort.

But what type of financial planner should the individual choose?

When making the decision to choose a financial planner, first understand the financial planning landscape. According to FINRA, the Financial Industry Regulatory Authority, almost anyone can call him or herself a financial planner and might come from many different types of backgrounds. Financial planners might be brokers or investment advisers, insurance agents, practicing accountants or individuals with no financial credentials. That is why the consumer must perform his or her due diligence before turning their money over to any sort of financial advisor. (For more, see: Top Financial Planning Colleges.)

The Bottom Line

When scanning the financial advisor landscape, recognize that both financial advisor and financial planner are very broad categories. 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, make sure to understand what you are paying for. Question the planner about his or her specific training and qualifications, fee structure and services the professional will provide. Consider developing a list of questions when vetting a financial planner. Finally, check the disciplinary record and references for the planner to make sure you’re receiving the best quality financial guidance. (For more, see: 7 Steps to Evaluate a Financial Adviser.) 

It's important to note that under the Department of Labour's new fiduciary rule requires all professionals who give retirement planning advice or who create retirement plans are held to a certain legal and ethical standard. For more information on this rule, read: DOL Fiduciary Role Explained as of March 29, 2017

 

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