Financial Advisor vs. Financial Planner

If you want assistance with developing your financial goals or managing your money, your first step is to consider whether you want to work with a financial advisor or a financial planner. Though the services these professionals offer can overlap, financial planners and financial advisors each focus on specific areas. 

Every square is a rectangle, but not all rectangles are squares, and the same is true about financial advisors and financial planners. While every financial planner is a financial advisor, not every financial advisor can help you plan for retirement and other milestones. Before you decide who to work with, you should understand the differences between them.

What Is the Difference Between Financial Advisors and Planners?

There are several critical financial advisor and planner differences. A financial advisor is someone who can help you manage your money. On the other hand, a financial planner not only can help you manage your money, but also focuses specifically on helping you reach your goals and putting your earnings to work for you.

Financial Advisors vs. Financial Planners

What Does a Financial Advisor Do?

A financial advisor can specialize in various areas, such as:

• Charitable Planning: A financial advisor can help you develop strategies for charitable giving that align with your values and financial goals. They can advise on tax-efficient ways to donate, such as through donor-advised funds or charitable trusts, ensuring your generosity makes the greatest impact.
• Cash Flow and Retirement Planning: Having enough money to live comfortably in retirement is a concern for many individuals. Advisors work with their clients to set up and fund a retirement plan focusing on steady, consistent wealth accumulation.
• Tax Planning: Developing an effective tax plan is a crucial step that prevents you from losing too much of your earnings and investment income to federal and state income taxes.
• Investment Planning: A financial advisor has the experience to assist you in building and managing a portfolio comprising various investment vehicles like stocks, bonds, mutual funds, real estate, and other assets.
• Insurance Planning: A financial advisor can help shop, evaluate, and select the appropriate life insurance policy so your loved ones can maintain their current standard of living if you pass away. A good advisor will also offer guidance in disability, long term care, and property and casualty insurance.
• Debt Repayment: Debt can be present in the form of mortgage, auto and personal loans, credit cards, and other financial obligations. A financial advisor can assist with setting up a manageable repayment plan to reduce the burden. 
• Estate Planning: A financial advisor can help with the crafting of an estate plan that ensures your assets will be managed, distributed, and preserved according to your wishes upon your death or incapacitation. 

A financial advisor may even be able to help you with all the above. Additionally, an advisor might cater to specific income levels. Someone who has a high net worth may want to work with a private wealth manager, while a person struggling to pay off debt may wish to work with a financial counselor. 

There are a few different types of financial advisors, and the kind you select can affect what services they offer. 

Learn the difference between different types of financial advisors below:

• Robo-advisor: With a robo-advisor, you can use a digital service that offers low-cost management for your investments. You will answer questions about your financial circumstances and goals, and the robo-advisor will develop an investment portfolio for you based on your risk tolerance and goals. This affordable option is ideal for those who do not want or cannot afford a comprehensive financial plan.
• Financial coach: Coaches typically do not have the same level of expertise, training, and credentials as a certified financial planner or advisor. Instead, they focus on teaching their clients the fundamentals of financial literacy, such as establishing productive saving and investment habits and reducing debt. 
• Online financial advisor: With an online financial advisor, you have virtual access to a real person when you need to talk to someone. Alongside automated investment management, you can discuss your financial situation and ask questions. This service is a bit more expensive than a robo-advisor, and you may face minimum investment requirements. 
• Traditional financial advisor: This type of financial advisor includes CERTIFIED FINANCIAL PLANNERS™, registered investment advisors, wealth managers, financial consultants, and stockbrokers. A single financial advisor can hold multiple titles. If you find a financial advisor located near you, you will likely meet in person to discuss your circumstances and goals. While the cost for these services may be higher, you will receive more personalized service and get to meet with someone for a confidential consultation. 
• Wealth advisor: These professionals primarily work with high-net-worth clients and provide holistic financial planning services and investment portfolio guidance. They generally advise clients in every aspect of their lives. Many wealth advisors will only serve individuals who can meet a minimum net worth or income threshold.

What Is a Financial Planner?

A financial planner is a type of financial advisor. Financial planners specialize in developing a comprehensive plan that helps you reach your long-term financial goals. A financial planner can assess your current financial situation and offer recommendations for improving your financial situation. They may also have specific areas of expertise like education funding planning or retirement planning. 

What Are the Differences in Certification?

A financial advisor and financial planner may hold different licenses and certifications. A financial advisor who helps manage investments or sells and buys stocks usually needs a Series 65 securities license. If a financial advisor provides financial planning, they likely need to be either a chartered financial consultant or a CERTIFIED FINANCIAL PLANNER™. 

Financial certifications offer proof that the financial advisor has the needed education and experience to successfully provide the services they offer. If you would prefer to work with a financial planner, look for a CERTIFIED FINANCIAL PLANNER™. A CFP® needs to complete relevant financial planning coursework and pass an exam that ensures they can apply their education to possible financial situations. Additionally, look for someone who has a fiduciary duty to act in their clients’ best interests.

Does It Cost More to Hire a Financial Planner or a Financial Advisor?

When deciding who you want to work with, it is essential to understand what you are paying for. The cost of a financial advisor or a financial planner will vary based on a few factors, such as how they receive compensation and whether they’ll offer ongoing services. As a result, neither an advisor nor a planner is necessarily more affordable than the other. 

A financial advisor’s work is usually either commission or fee-only. Advisors who get paid by commission make money based on the products or services they sell, while fee-only advisors earn money via the services they offer. To mitigate conflicts of interest and avoid sales pitches, you should select a fee-only professional. 

Additionally, if the financial advisor or planner provides ongoing services, they typically charge a percentage based on the assets they manage. Some financial advisors may charge an hourly fee or flat rate as well. However, request more information from the financial advisor or planner to learn more about their rates.

Should You Hire a Financial Planner or a Financial Advisor?

You have a unique financial situation, and you deserve to work with someone who can cater to your specific needs. Before you decide about the type of financial advisor you want to work with, you should consider your needs and what services you are seeking. By doing so, you can determine whether someone is a good fit even before your initial meeting.

You want to work with an advisor who has experience with clients who are in similar financial situations. Search online and ask your co-workers, family, and friends for referrals. At HSC Wealth Advisors, we have CERTIFIED FINANCIAL PLANNERS™, Accredited Investment Fiduciaries®, Certified Public Accountants, Certified Kingdom Advisors®, and a partner who has earned the right to use the chartered financial analyst (CFA) designation. 

Contact HSC Wealth Advisors

At HSC Wealth Advisors, we are an independent, fee-only wealth management firm. Our team of experienced investment managers and financial advisors can provide you with the professional expertise you need to start your financial portfolio, develop a comprehensive financial plan or create a secure retirement strategy. No matter what your goals are, our team is eager to help you achieve them.

We began by serving individuals and families local to Roanoke, Bedford, and Lynchburg, and have since grown our client base throughout the U.S. We can help you understand and plan for:

• 401(k), 403(b), and 457 plan savings
• Pension options
• Social Security benefits
• Tax planning
• Estate planning

We look forward to working with you to develop and achieve your financial goals. Speak with an advisor by contacting us at HSC Wealth Advisors today.