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Financial planner vs advisor: which one to choose?

Step into the financial ring with confidence — our guide contrasts financial planners and advisors, helping you make an informed decision about which professional is best suited to your life goals.



November 8, 2023

7 min read

What's Playbook? We're your friendly guide to paying less in taxes (legally!) and putting your money in the right places automatically. Money stuff can feel hard, but we’re here to help along the way.

Key takeaways
  • Certifications: Financial planners typically have a CFP designation; financial advisors may have a CFA or other investment-focused titles.
  • Services: Planners offer wide-ranging financial advice; advisors focus on investments.
  • Fiduciary Duty: CFPs are fiduciaries by standard; for advisors, it varies.
  • Compensation: Planners often charge fees for service; advisors might earn commissions.
  • Relationship Focus: Planners look at long-term financial health; advisors may target specific investment goals.

In this article

      When it comes to managing your finances, the guidance of a professional can be invaluable.

      However, with titles like "financial planner" and "financial advisor" often used interchangeably in the finance industry, it's crucial to understand the differences to ensure you're getting the right kind of help.

      Quick take: Financial planner vs. financial advisor

      Financial Planner Financial Advisor
      Focus Holistic financial health Investment and portfolio management
      Services Budgeting and saving, tax planning, retirement planning, estate planning, insurance needs Investment strategies, portfolio management, selection of financial products
      • Certified Financial Planner (CFP)
      • Chartered Financial Consultant (ChFC)
      • Chartered Financial Analyst (CFA)
      • Certified Investment Management Analyst (CIMA)
      • Certified Private Wealth Advisor (CPWA)
      Regulatory Standard Fiduciary duty (for CFPs and ChFCs) May vary; not all are fiduciaries
      Compensation Fee-based (fixed, hourly, or by plan), may also include assets under management fees Commission-based, fee-based, or a combination
      Best For Comprehensive financial planning for long-term goals Focused investment advice and portfolio management

      What is a financial planner?

      A financial planner is a professional who helps individuals create a strategy to meet long-term goals. Financial planners typically have a broad view of your financial situation and can guide you on a variety of topics including budgeting, saving, investing, insurance, tax planning, retirement planning, and estate planning.

      Certifications and qualifications

      Most reputable financial planners hold certifications that demonstrate their expertise. The CFP designation (Certified Financial Planner) is one of the most respected in the industry, requiring candidates to pass a rigorous exam and adhere to a strict ethical standard.

      Services offered

      Financial planners offer comprehensive services that cover the spectrum of financial management:

      • Budgeting and Saving: Creating a budget that aligns with your financial goals.
      • Investing: Guidance on where and how to invest.
      • Tax Planning: Strategies to minimize tax liabilities.
      • Retirement Planning: Planning for a secure and comfortable retirement.
      • Estate Planning: Ensuring your assets are distributed according to your wishes after death.
      • Insurance: Assessing your need for insurance to protect your financial plan.

      What is a financial advisor?

      A financial advisor is a broader term that includes any professional who helps you manage your money. This can include investment management, estate planning, and tax advice. Financial advisors often focus on portfolio management and investment products.

      Qualifications and certifications

      Financial advisors may hold various designations, but not all are required to have a certification. A Chartered Financial Analyst (CFA) is one of the highest distinctions in the investment management profession.

      Services offered

      The services offered by financial advisors are often more focused on investments:

      • Investment Strategies: Developing a strategy that matches your risk tolerance and investment goals.
      • Portfolio Management: Ongoing management of your investment portfolio.
      • Financial Products: Advising on the selection of financial products like mutual funds, stocks, and bonds.

      Key differences: Financial advisor vs planner

      While both financial planners and advisors can offer investment advice, the key difference lies in the scope of services and the approach to your financial life.

      • Services: Financial planners take a holistic view, while financial advisors may focus more on investments.
      • Qualifications: CFPs are certified to offer broad financial planning, whereas CFAs focus on investment analysis and portfolio management.
      • Regulatory Environment: Financial planners who are CFPs are bound by the fiduciary standard, meaning they are required to put their clients' interests first. Financial advisors may or may not be fiduciaries, depending on their certifications and the services they offer.
      • Compensation Models: Financial planners often work on a fee-based model, charging for the plan they create, while financial advisors may also earn commissions on the products they sell.

      Understanding fee structures

      When selecting a financial planner or advisor, it's essential to comprehend how they are compensated, as this can influence the advice they provide. Here are the primary fee structures you might encounter, including the often-used Assets Under Management (AUM) fee:

      • Fee-Only: This model means the planner or advisor is paid directly by the client for their services at an hourly rate, a flat fee, or a retainer. They do not receive any commissions from selling products, which helps to minimize conflicts of interest.
      • Fee-Based: Professionals operating under this model charge a fee for their advice and may also receive commissions from financial products they sell to clients. This dual revenue stream can potentially lead to conflicts of interest, so it's important to understand how your advisor is compensated.
      • Commission-Based: Advisors are paid commissions by the providers of the products they sell. Their income is directly tied to the financial products they recommend, which may influence their recommendations.
      • Assets Under Management (AUM): Many advisors charge a fee based on a percentage of the assets they manage for you. This fee is typically a percentage of your total account balance and is often tiered—the more assets you have under management, the lower the percentage you might pay.

      Each fee structure has its own set of incentives, which can affect the advice you receive. It's important to ask your financial professional to explain their fees and how they're calculated so you can make an informed decision that aligns with your financial goals and preferences.

      How to verify credentials

      Before entrusting someone with your financial future, it's essential to verify their credentials. Here's how you can check the qualifications of a financial planner or advisor:

      • CFP Board: If they claim to be a Certified Financial Planner, check the CFP Board's website. The CFP Board has a verification tool to confirm the certification and check for any disciplinary action.
      • BrokerCheck: Run by FINRA, BrokerCheck is a free tool to research the background and experience of financial brokers, advisers, and firms.
      • Investment Adviser Public Disclosure: The SEC’s IAPD provides information on both registered investment advisors and those who have been barred or suspended.
      • Professional Associations: Many financial professionals are members of associations like the National Association of Personal Financial Advisors (NAPFA) or the Financial Planning Association (FPA), which also have member directories and standards.
      • Ask Directly: A reputable financial professional will not hesitate to provide their credentials, details of their experience, and references upon request.

      Taking the time to verify financial credentials can give you peace of mind and help ensure that you're working with a qualified professional who is capable of addressing your financial needs.

      Financial planning and advising in different life stages

      Financial planning and advising play a dynamic role throughout an individual's life, adapting to changing goals and circumstances. For those in their 20s and 30s, these services are pivotal in laying the groundwork for a secure financial future.

      In your 20s: Laying the foundation

      Your 20s are about setting the stage for financial success. Key areas of focus should include:

      • Debt Management: Learn strategies to manage or pay off student loans and avoid consumer debt.
      • Budgeting: Establish a budget that accounts for your income, expenses, and savings goals.
      • Emergency Fund: Start building an emergency fund to cover unexpected expenses.
      • Retirement Savings: It's never too early to start saving for retirement. Even small contributions to a 401(k) or IRA can grow significantly over time due to compound interest.
      • Insurance: Evaluate your need for insurance, including health, disability, and possibly renters' insurance.

      In your 30s: Building and protecting wealth

      As you move into your 30s, your financial planning needs often become more complex:

      • Career Growth: Maximize your earning potential through career advancement or further education.
      • Family Planning: If you're starting a family, you'll need to plan for additional expenses and life insurance to protect your loved ones.
      • Homeownership: For many, this decade includes purchasing a home. Financial advisors can help with saving for a down payment and understanding the impact of a mortgage on your finances.
      • Investment Strategy: This is a critical time to develop a robust investment strategy. Diversification and risk management become key components of your financial plan.
      • Estate Planning: Begin creating or updating your will and consider setting up trusts or other estate planning instruments.

      For individuals in their 20s and 30s, financial planning and advising are not just about wealth accumulation but also about establishing smart financial habits and protections that will serve as the backbone for future stages of life. Engaging with a financial planner or advisor during these formative years can help ensure that you're making the most of your financial opportunities and setting a course for long-term stability and prosperity.

      The bottom line

      Understanding the distinct difference between a financial planner vs. advisor is crucial in choosing the right professional to help you achieve your financial goals. 

      Your choice between a financial planner and an advisor should be based on your specific financial needs:

      • Complex Financial Situations: If you have a complex financial situation involving multiple goals and assets, a financial planner may be more suitable.
      • Investment Advice: If you're primarily looking for help with your investment portfolio, a financial advisor might be the way to go.


      Can a financial planner also be a financial advisor?

      Yes, some professionals are qualified to offer both planning and investment advice.

      How do I know if a professional is a fiduciary?

      Ask them directly about their fiduciary status and look for certifications like CFP, which require fiduciary responsibility.

      Certified Financial Planners (CFPs) are typically required to act as fiduciaries, which means they are ethically bound to act in their clients' best interests.

      On the other hand, not all financial advisors are fiduciaries. The term "financial advisor" encompasses a range of financial professionals, and while some, like Registered Investment Advisors (RIAs), do have a fiduciary duty, others may not. It is crucial to directly ask any financial advisor about their fiduciary status to understand the nature of the advice they provide.

      What should I prepare before meeting with either a financial planner or advisor?

      Preparing for your first meeting with a financial planner or advisor is crucial to getting the most out of the consultation. It's like mapping out a route before a road trip; the better you prepare, the smoother the journey.

      Here's a checklist to help you gather your thoughts and documents:

      • Financial Goals: Clearly define what you want to achieve, both in the short term and long term. Are you saving for a house, planning for retirement, or looking to invest?
      • Financial Statements: Gather your recent bank statements, investment accounts, debts, and any other financial assets or liabilities.
      • Income and Expenses: Bring details of your income and a list of monthly expenses. This could include pay stubs, monthly bills, and leisure spending.
      • Tax Returns: Have the last two years of tax returns available, as they can provide a comprehensive view of your financial history.
      • Insurance Policies: Details of current insurance policies will help in assessing your coverage needs.
      • Estate Documents: If applicable, bring any estate planning documents, such as wills or trust agreements.
      • Questions: Write down any questions or concerns you have. No question is too small, and it's important that you feel comfortable and informed.

      Remember, the goal of this meeting is to create a financial plan that's tailored to you. The more information you can provide, the more personalized your plan will be.

      Can financial planners or advisors be Chartered Financial Consultants (ChFCs)?

      Yes, financial planners or advisors can also be Chartered Financial Consultants, but it's not a requirement for their roles. The ChFC is a specific designation they can earn to demonstrate advanced knowledge in financial planning.

      Is it worth getting a financial planner?

      It depends – expert financial advice can accelerate your success, but it’s not guaranteed and the fees get steep. 

      Learn more: Are financial advisors worth it

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