Financial Planner vs. Financial Advisor: An Overview

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

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, claims 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.

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 might come from many different 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. Here are some differences between the two terms.

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, 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 licensures, the financial planner must complete a different set of education, examination, and work history requirements.

According to FINRA, almost anyone can call him or herself a financial planner and might 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 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.

Financial advisor as a general term includes subsets of the financial advisor group, such as stockbrokers, 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.

The Bottom Line

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.

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

Key Takeaways

  • The financial planner is one type of financial advisor, who helps companies and individuals create a program to meet long-term financial goals.
  • Financial advisor is a broad term for a professional who helps manage your money.
  • Most individuals who need money help will enlist a financial planner, which is a more specific type of financial advisor.