A 2019 survey found that 70% of US adults have some form of non-retirement savings. However, only 20% of those with savings feel very confident about its adequacy. By contrast, 25% of folks don’t feel confident at all about how much they’re saving.
If you’re uncertain of your financial standing, an advisor or a planner can help. Both can help you assess, stabilize, and grow your finances to help you secure your future.
That doesn’t mean a financial planner is the same as an advisor, though.
To that end, we created this guide comparing financial planner vs. advisor responsibilities. Read on to discover what kind of services they offer, how they can help, and when to hire which.
What Is a Financial Advisor?
A financial advisor is a professional who assists clients in managing their money. Advisors may specialize in estate planning, retirement planning, tax planning, or investments. They may also cater to clients who need help with debt repayment or bankruptcies.
Many financial advisors focus on individual clients. These experts are what you call personal financial advisors. In the US alone, an estimated 218,050 personal financial advisors were in employ in 2020.
Financial advisors also work for businesses of all sizes and massive corporations. For example, they can help a client determine how much an initial business capital should be. They can also give insights on investments to prioritize or areas to economize in.
Corporate advisors are also financial experts on business acquisitions and mergers. In such cases, they work with business and real estate lawyers and researchers.
Some advisors must hold a license, depending on the specific services they provide. Securities licenses, which the law in many states requires, are perfect examples. Only licensed advisors can legally market and sell investments.
What about a Financial Planner?
A financial planner is a type of advisor who specifically deals with financial plans. In this sense, financial planners are a specialized class of financial advisors. So, a financial planner is an advisor, but not all advisors are planners.
One of the main tasks of a planner is to develop a plan that helps a client meet long-term financial goals. These can include plans dealing with estates, wealth, retirements, taxes, and investments. They can also aid clients in planning for future education funding or debt repayment.
Since planners do more specialized financial tasks, they also need specialized training. They undergo extensive financial education and adhere to strict ethical standards. They must also hold the Certified Financial Planner (CFP) designation.
In fact, financial planners can only rightly call themselves that if they are a CFP. To become a CFP, one must first have a college degree and then work for three years in the financial planning field. The process also involves loads of coursework to finish and to take and pass the CFP exam.
Because of all those requirements, only one in five financial advisors in the US are CFPs. There are just over 89,000 CFPs who work in the US.
Financial Planner vs. Advisor: When to Hire Which
Your specific financial needs are the most important thing you need to consider. What exactly do you need help with? Do you need someone to guide you with a little bit of everything?
Ask yourself those questions, and then note all your potential answers down. Then, compare them with the instances we outlined below to help you make the right decision.
When It Might be Smarter to Go With a Financial Advisor
If you have a specific financial issue, such as debts, an advisor can give you useful insights. In this case, a financial advisor will first analyze your current debts. From there, the expert can educate you on the best methods to manage and repay what you owe to your creditors.
Another example is if you need specific help in buying or starting a business. A financial advisor can tell you how viable or profitable your business concept or idea is. The specialist can also help you explore business financing options.
A financial advisor can also be your go-to if you want to start investing in financial products. These include certificates of deposits (CDs), mutual funds, or even whole life insurance. You can even buy investment media from them, so long as they carry the proper license.
When It May Be Best to Hire a Financial Planner
If you need someone to guide you with all your long-term financial goals, a planner may be your best bet. The same goes for if you want comprehensive assistance for not just one, but all your money matters.
Suppose you’re already making good money, but you’re still one of the 43.2 million people in the US with student debt. Despite that, you believe you’re ready to become a homeowner by taking out a mortgage loan.
Let’s also say you want your own home soon because you and your partner are ready to wed and build a family. For the same reasons, you plan to start exploring investments for the sake of your loved ones. You may even be looking into saving for retirement or your future kids’ education funds.
If your real-world situation is similar to that hypothetical one, you may be better off with a planner. A financial planner can help you better manage your debt, income, and savings.
With the help of a planner, you have a higher chance of reaching your other goals, such as owning a home. From there, you can expect your planner to help you make good investments, too. This may then help you save more for retirement or build a financial net for your kids.
When you do an online search for a CFP, though, be specific and search for a “certified financial planner near me.” You’d want to speak with actual CFPs, not just someone who claims to be a financial planner. You can verify CFP credentials using the CFP Board’s online verification tool.
Make the Right Hiring Choice Based on Your Financial Needs
There you have it, the ultimate guide comparing a financial planner vs. advisor. Just remember that a planner specializes in comprehensive financial planning for your future. By contrast, an advisor can give you specific advice on topics such as debts or investments.
So, if you want someone to help you handle all facets of your finances, go with a planner. However, if you only need help for certain areas, an advisor may be a better choice.
Interested in more guides on money matters or business? Check out our recent blog posts for more tidbits of wisdom then!