Financial Planning vs. Financial Advisor
What’s the difference between a financial planner and a financial advisor?
Written by Mike Rogers, President and Founder at 360 Financial
When you start to get serious about pursuing financial independence, you’ll probably begin to wonder about the difference between “financial planning” vs. “financial advisor.” Similar terms can cause confusion, but we’re here to help you understand these terms and their differences.
TABLE OF CONTENTS
What is Financial Planning?
You have a financial goal but don’t know what steps to take to reach that goal.
That’s where financial planning comes in: Financial planners help you create an actionable, achievable financial plan to help you meet your goals.
A financial planner can help you reach long-term goals related to:
Budgeting
Saving
Retirement planning
Investing
Insurance
What Does a Financial Planner Do to Help Their Clients?
A financial planner creates long-term programs to help their clients reach their long-term financial goals. They help you chart a course for your life as it relates to your finances, analyzing every aspect—such as your savings, taxes, expenses, and investments.
Goals a financial planner can help you achieve include:
Saving to fund your child’s college education
Buying a new home
Saving to retire comfortably
Increasing profitable investments
One key aspect of a financial planner is that they provide targeted services. You’ll come in with a specific goal in mind, and they’ll help you reach that goal.
What Designation Does a Financial Planner Have?
Typical designations of financial planners include:
Chartered Financial Analyst (CFA)
Chartered Financial Consultant (ChFC)
Certified Investment Management Analyst (CIMA)
Make sure your financial planner has at least one of these designations before moving forward with them. The term “financial planner” is an unregulated umbrella term, so you’ll want to be sure that they have the proper designations before trusting them with your financial future.
Now that you have a full understanding of financial planners, we’ll dive into the difference between them vs. a financial advisor.
What Is the Difference Between a Financial Planner and Financial Advisor?
The difference is that while a financial planner helps you with a very specific goal, financial advisors are broader in their approach. Financial advisors typically offer the same services as financial planners, but they offer even more, including managing your investments.
Another key difference between financial planners vs. financial advisors is how you pay them. A financial planner will typically charge a flat hourly or annual fee, while a financial advisor often earns a commission on investments or products they sell. Some financial advisors earn a combination of commissions and flat fees, and others may charge a percentage of your overall portfolio per year.
Now, we’ll dive further into what exactly a financial advisor does to help you further understand the difference.
A financial planner will typically charge a flat hourly or annual fee, while a financial advisor often earns a commission on investments or products they sell.
How a Financial Advisor Helps Their Clients
While a financial advisor offers similar services to a financial planner, they also offer even more services, including:
Managing your investments
Acting as your stock broker
Advising and arranging insurance coverage
Strategizing estate planning
Making financial decisions
Executing your financial plan
While a financial planner will create your plan, a financial advisor will provide more hands-on services actually to help you execute that plan.
Designations a Financial Advisor May Have
If a financial advisor is working with the public, they are required to hold a FINRA Series 65 license. On top of that license, they may also hold other financial certifications that are similar to those of a financial planner. These may include:
Certified Financial Planner (CFP)
Chartered Financial Analyst (CFA)
Chartered Financial Consultant (ChFC)
Certified Investment Management Analyst (CIMA)
The main designation to look for in a financial advisor is the FINRA Series 65 license.
Do I Need a Financial Advisor or a Financial Planner?
Choosing between a financial advisor and a planner will look different for everyone. The right fit for you depends on what your individual needs are. Before we jump into how to decide, remember that your needs will probably change over the course of your life. While one may be the best fit for you now, you may want to switch in a few years.
A financial planner is best for you if you:
Want help developing a long-term financial plan, but don’t need help implementing that plan
Want to understand how your finances will evolve over your lifetime
Have gone through a major life change, such as getting married
Are nearing retirement
Need help managing debt, saving for college or retirement, or minimizing expenses
Need help strategizing about asset transfers
A financial advisor may be the best fit for you if you:
Are looking for help implementing your financial plan
Don’t want to or don’t feel comfortable making financial decisions
Are looking for occasional financial guidance
Need help with a specific investment strategy
Again, your situation will likely change over your lifetime, so your decision isn’t permanent. You can always change your mind in the future.
Do I need to find a financial advisor or planner locally?
No, you don’t need to find a financial advisor or planner locally.
In fact, doing so can be extremely limiting. The best fit for you may be just a Zoom call away, so don’t be afraid to consider financial advisors or planners that aren’t local.
What is the cost of working with a financial advisor?
Financial advisors can charge for their services in a few ways:
Flat hourly ($100 – $400 per hour) or annual fee (ranging between $2,000 and $7,500 per year)
Commission on investments or products (a certain percentage)
A certain percentage on your portfolio (typically 0.25% to 1% per year)
It all depends on which financial advisor you choose, and how they charge for their services.
What are the 4 Pillars of Wealth Management?
Key Takeaways
A financial planner creates a plan, while a financial advisor creates your financial plan AND executes it.
A financial planner offers targeted services, while a financial advisor can help with more general financial services.
Choosing a financial planner vs. a financial advisor depends on your specific circumstances and needs, and these may change at any time.
Looking for a financial planner or advisor locally limits your options and may stop you from finding the best fit.
Next Steps
When you’re looking for a financial advisor, look for one that puts your needs first. At 360 Financial, we have a process centered around you, your goals, and what matters to you. We want to get to know you and your family, your financial goals, and any frustrations you have.
If you decide to work with us, we’ll mutually decide if there’s a comfortable fit—after all, we want to make sure your needs are being met. Book a 15-minute introductory call with 360 Financial today.
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About the Author
This article has been reviewed by Mike Rogers, 360 Financial President and Founder of Wayzata-based 360 Financial. Prior to establishing the firm in 1995, he spent seven years with two of the nation’s largest investment firms. As a fiduciary, he utilizes his 30+ years of experience to plan and implement strategies tailored to address the issues and concerns of qualified retirement plan trustees, high-level professionals, and thriving business owners.
Schedule a Call
At 360 Financial, you and your financial goals come first, always. We’ll help you understand all the pieces of your financial puzzle, and work toward your financial goals for long-term success. Book a 15-minute introductory call with us today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.