Differences between financial advisers and financial planners
Generally speaking, financial adviser is the umbrella term for any financial professional who provides advice, and financial planner is a type of financial adviser. The differences lie in the services the professionals provide.
A financial adviser may provide advice on a range of financial products and services. A financial planner develops financial plans that may cover everything from budgeting to saving for retirement and then works with you toward achieving those financial goals.
“I know many folks titled as financial advisers that offer comprehensive financial planning services and hold their CFP designation,” Bruggink says.
What is a financial adviser?
A financial adviser is a broad term for any financial professional who provides advice, whether on investments, insurance, mortgages or taxes.
Financial advisers can take many forms and can include, but may not be limited to:
Despite the many potential titles, financial advisers generally come in two main types: fiduciaries and non-fiduciaries. A fiduciary adviser is legally and ethically obligated to place their client’s interests first and avoid conflicts of interest, providing financial advice that is always in the best interests of their clients.
Money managers, investment consultants and financial planners who advise on investments are regulated in the US as “investment advisers” by the US Securities and Exchange Commission (SEC) and are legally held to the fiduciary duty.(1) Some financial advisers, like those with professional designations such as the Accredited Investment Fiduciary (AIF) designation, may not be regulated by the SEC but take a voluntary oath to uphold fiduciary duties.
On the other hand, non-fiduciary advisers may not be required to avoid potential conflicts of interest and may guide you toward a financial product that earns them a commission. For instance, under the rules of the Financial Industry Regulatory Authority (FINRA), a financial adviser who works for a broker is required only to recommend a security or product that they have “a reasonable basis to believe” is suitable for you, but that product may have higher fees or come with a bigger commission for the adviser.(2) According to FINRA rules, the product recommendation “does not obligate a broker to recommend the ‘least expensive’ security or investment strategy.”
“If you’re looking for financial help, one of the most important things is to make sure the person you are working with is a true fiduciary,” says Brent N. Bruggink, CPFA, Director of Retirement Plan Services at CG Financial Services. “Unlike the general titles and terms, a fiduciary is legally bound to put their client’s best interests ahead of their own.”
What is a financial planner?
A financial planner is a type of financial adviser. Financial planners take a holistic view of a person’s entire financial life and devise a plan to help them meet their short- and long-term financial goals. This plan may involve the following:
Saving for college education
Financial planners evaluate their client’s financial situation, needs and goals before coming up with a detailed plan on how to meet those objectives. Many financial planners have official designations like certified financial planner (CFP), chartered financial analyst (CFA) and Enrolled Agent (EA).
However, no regulatory body governs the financial planning profession. Instead, professionals who design financial plans are regulated by the services they provide. For instance, a financial planner who provides investment advice would be regulated by the SEC.
Some financial planners are also fiduciaries. Financial planners who hold the CFP designation are required to act as fiduciaries.
When to hire a financial adviser
If you need advice in certain areas of your finances, such as with taxes or investment advice, you might consider hiring a financial adviser who specializes in that particular area. For instance, you may hire an investment adviser if you want a managed portfolio and ongoing investment advice.
When to hire a financial planner
If you want someone to help you build a detailed plan or roadmap to achieving various short-term or long-term financial goals, incorporating your whole financial picture, you may consider a financial planner. A financial planner will consider all aspects of your finances to help you pay down debt, minimize taxes, save for your kid’s education, plan for retirement and other financial goals.
How to find a financial planner or adviser
Here are some steps to find the right financial professional for you:
Determine your goals and needs. Ask yourself what kind of financial advice you need: debt management, retirement savings, investing advice or a detailed financial plan that encompasses all your financial goals.
Search for a reputable planner or adviser. When analyzing advisers, look for designations like CFP and licensing and registration with FINRA and the SEC if you’re looking for investment management advice. Also, ask if they’re fiduciaries.
Ask friends and family for referrals. You may know someone who can stand by the performance of a financial planner or financial adviser.
Use reputable online sources: Review databases like the National Association of Personal Financial Advisers (NAPFA).
Compare financial advisors
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A financial planner is a type of financial adviser who can help you build a full-picture plan to achieve your financial goals. If you need advice in specific areas of your finances, you might consider other types of specialized financial advisers. Just consider the credentials and reputability of the professional when looking at different places to find investment advice.
Frequently asked questions
The best option depends on your financial situation and goals. A financial adviser may be suitable for specific services like investment advice, but a financial planner can help you build a comprehensive financial plan.
Not all financial planners are registered or licensed to perform tasks like providing securities advice.
It's a good idea to hire a financial planner if you need personal guidance on meeting different financial goals.
Financial planners generally offer guidance on your entire financial life. Financial coaches tend to help you meet specific financial goals like building an emergency fund, and they may also specialize in helping you change your money mindset or behavioral finance.
Javier Simon is a freelance finance writer at Finder and a certified educator in personal finance (CEPF).
He’s featured on NerdWallet, Bankrate, Yahoo Finance and Fox Business, where he’s shared his expertise on personal finance topics, such as investing, retirement planning, taxes, budgeting and savings.
He has also covered breaking news, such as student loan forgiveness initiatives, the housing market and inflation’s impact on consumers’ wallets.
His passion is turning complex financial concepts into actionable content that can help people improve their financial lives.
Javier holds a bachelor’s degree in multimedia journalism from SUNY Plattsburgh.
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