The title of financial advisor and financial planner are commonly used in the financial world, but there is a difference. Let’s explain.
Financial advisor is a broad term used to refer to most professionals who advise you on your financial situation. A financial planner on the other hand should be able to help you construct a comprehensive written financial plan.
Some financial advisors may advise you on a specific investment product, such as a brokerage account, an insurance policy, etc. However, financial planners look at your entire financial picture to make sure all of the pieces fit together like they should such as taxes, insurance, retirement planning, estate planning, etc. A financial planner can help you put a plan in place to meet your long-term financial goals.
Often in the industry, financial advisor and financial planner are used interchangeably and there is no regulatory guidance or rules for using these titles. Rather than focusing on a person’s title, focus on their credentials. A Certified Financial Planner (CFP® or CERTIFIED FINANCIAL PLANNERTM) is a person with thousands of hours of work-related experience in financial planning as well as educational requirements and examinations. CFPs are also held to a fiduciary standard, although some must adhere to a broker/dealer’s guidelines which can cause a conflict of interest. Certified Public Accountants hold themselves as fiduciaries and are held to the highest level of discretion and expertise. Only CPAs can obtain the PFS designation as a Personal Financial Specialist.
Whether you seek advice from a financial advisor or financial planner, always work with someone who is a fiduciary to ensure they’re acting in your best interest. Make sure they have credentials, a great reputation and have the knowledge to help you create a plan that takes into consideration insurance planning, investments, tax planning, retirement planning, estate planning, etc.