When it comes to the realm of finance, terminology can be confusing. That’s one reason I put together my post on the 14 different types of financial advisors, and I was just scratching the surface. So, when you hear people throwing around lingo like investment advisor, financial planner, financial advisor, CFA, CPA, and so on, you’re wondering: what, exactly, is the difference between a financial advisor vs a financial planner?
The financial world is littered with overconfident financial corpses. Thought you knew the difference, but didn’t? Good bye retirement account.
Think it’s not a big deal to not understand how your financial advisor or planner makes money? You know who else didn’t care how their investments worked? Everyone who gave their money to Bernie Madoff, and look how that turned out: life-savings gone.
But never fear: the author is here. I’ll help you navigate the difference between a financial advisor and a financial planner, just like the Goddess Styx helped souls navigate the underworld.
The Difference Between Financial Advisor vs Financial Planner
It’s easiest to think of financial planners as a subset of financial advisors.
There are many different types of financial advisors. There are stockbrokers, accountants, financial analysts, insurance salesmen, and so on. Each of these might go by the title “financial advisor” and all of them will specialize in something different.
In the same sense, a financial planner is just a more specific designation of financial advisor, although not that much more specific. The typical financial planner has much broader duties than a broker, for instance.
In general, though, the distinguishing characteristic of a financial planner is an emphasis on long-term goals. A financial planner will help you put together a savings plan, figure out how you’re going to reach retirement, set up a budget, and figure out a sustainable investment plan. Notice the key word here: plan.
This is difference from, say, a percentage-based financial advisor (covered in my post on types of financial advisors) who will manage your investment account for an annual percentage. Financial planners won’t do something like that. They’ll stick to helping you put together financial plans.
Wrapping it up
Okay, so once again, the difference between a financial advisor vs a financial planner is that financial planners focus on helping you plan your finances, while financial advisors are a broad class of different types of advisors, who might be planners, and might not.
Enjoy your stay in the underworld!