Financial advisor and financial planner are terms frequently heard in the financial industry. Although the two terms are often used interchangeably, there is a clear difference and each provides a specific service. So what is the difference between a financial planner vs advisor? Which form should you choose? This article will analyze these two types of services in detail and advise which type of service is suitable for your specific needs.
What is a financial advisor?
A financial advisor is a financial professional that helps you manage your money, primarily your investing activities. Advisors can specialize in investment management, estate planning, retirement planning, insurance, debt repayment, tax planning, or any other aspect of the financial industry. While this is not a mandatory requirement, financial advisors typically hold a bachelor’s or master’s degree in finance or a related discipline. Since they are engaged in providing direct investment advice and management, they must hold a FINRA Series 65 license, which requires specific qualifications and standards of conduct. There are different types of advisors, each offering their own set of strategies and services – as well as their own expertise.
Financial advisors often charge a flat fee or a commission, or both. Fixed fee structures can be based on total expected work, hourly fees, or a percentage of assets under management. If a financial advisor earns a commission, they will earn a fee every time they make a trade in your portfolio. In addition, financial advisors can earn commissions based on the performance of your portfolio.
What is a financial planner?
If financial advisors are primarily concerned with managing your investments, then financial planners often work in a broader scope. While there may be some involvement with investment management, a financial planner is more likely to focus on your larger financial picture. That will include helping you develop and implement strategies to achieve your financial goals – or even helping you define what those goals are. Financial planners work in a less structured professional environment. They may not be required to pass industry exams, meet minimum educational standards, or obtain a license to practice.
The costs for financial planners are similar to those of financial advisors. Let’s say the advisor provides your overall financial services, such as budgeting, savings goals, retirement, and estate planning. In that case, they may charge a flat fee based on the amount of work. Even a price list for each service the planner offers can exist.
Differences between Financial Planner vs Advisor
While both financial advisors and financial planners work with clients and offer helpful advice, there are some key differences between the two. For example, while many financial advisors assist clients for an extended period of time, some only help clients with specific transactions or investments.
Financial planners, on the other hand, tend to take a more holistic approach to a client’s finances and develop long-term plans that address all aspects of a client’s financial life. Another key difference is that financial advisors can earn commissions on some of the products they sell, while financial planners typically charge an hourly or flat fee for their services. . Finally, although financial advisors and planners often have many of the same licenses, they often have different certifications- including the CFP designation.
Should I Get a Financial Advisor or a Financial Planner?
Everyone has a unique financial situation and therefore different needs. You should determine your needs before deciding what type of financial advisor to work with. That way, you can find out if they’re a good fit for you before you even meet them. For example, if you have short-term issues or need assistance with specific questions or investments, a financial consultation would be appropriate. However, if you want help developing a comprehensive long-term plan for your finances, you should work with a financial planner.
Ideally, you should find someone who has experience working with clients in situations similar to yours. Get recommendations from family, friends and colleagues and search online. To choose the best service for you, think about three or four options. Since many advisors and planners will offer a free consultation, you should take advantage of that opportunity for a personal interview. You can get an estimate of the work they will provide and what it will cost, and you can also assess if the service they provide is a good fit for what you are looking for.
If you want to work with a financial planner, you should find a CFP. A difficult exam and suitable courses in financial planning are requirements for certification as a financial planner. The exam ensures that they can apply their knowledge to financial situations. They must also have at least three years of full-time financial planning experience. Most importantly, certified financial planners have a fiduciary duty to work in the best interests of their clients. They must follow the CFP Board’s code of ethics and conduct, which means they should always give advice based on their best interests rather than their own.
Conclusion
A financial advisor is a right choice if you are primarily interested in receiving the benefits of professional management of your investments. But if you’re looking for broader financial advice, like retirement planning, estate planning, budgeting, or saving money, you’ll need the services of a financial planner. In either case, check your options carefully. Take advantage of a free consultation and consider any fees before asking one of these professionals to manage your finances. Hope this financial planner vs advisor comparison is useful to you.
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