What is the Difference Between Financial Planner and a Financial Advisor?
- September 29, 2021
- Posted by: timothymaceachern
- Categories: Financial Advisor, Financial Planning
Managing your finances requires a lot of discipline and the right knowledge. With rising consumerism, people tend to make financial decisions that are not viable for them in the long run. The simple and easy solution to this problem is to hire a financial professional.
A financial professional can have a varying degree of expertise depending upon their certification. The two types of financial experts we are going to discuss are financial planners and financial advisors. Some jurisdictions have a definitive law regarding who can be called a financial planner but there are no such restrictions imposed on a financial advisor.
What Does A Financial Advisor Do?
The term financial advisor is a really broad term if we look at what this expert can do for you. In short, you pay the financial advisor and they will handle a certain financial task for you. These financial or money-related tasks can include investments in stocks, mutual funds, setting up a pension, and/or selecting an insurance provider.
A financial advisor focuses on a certain task assigned to them by you. They will apply their expertise and knowledge to get you the best possible returns and benefits in that specific niche. For example, if you give them a certain amount to invest they will make sure that amount is invested in the best possible stocks or investment venue.
A financial advisor will not take into account the bigger picture, which means that they will not advise you against taking certain actions such as investing or buying a property but they will make sure that you get the best possible deal.
They might miss on important things, for example, if you decide to invest all your savings they will be oblivious to the fact that you do not have an emergency fund for an unforeseen situation.
A financial advisor will not give you the solution to your financial problems and questions regarding your struggling finances. You will not get answers to questions such as how much money you will need to live comfortably after retirement or how will you be able to survive if a financial crisis befalls you.
Lastly, a financial advisor will only focus on selling your financial products because their commissions are tied to them. It is even possible that the financial advisor you are consulting with only gets paid if they recommend a certain product such as a pension fund or a mutual fund.
There are two types of financial advisors one that is paid on a commission basis and the other one being fee-only. The recommended way is to choose an expert that works on a fee-only basis so they will be able to make an unbiased decision on your behalf.
What Does A Financial Planner Do?
A financial planner is also a type of financial advisor, but they make sure that they take into account the bigger picture. A financial advisor is like your second brain because they are aware of everything about your finances and financial condition.
When you consult a financial planner they will start by discussing what are your future goals. Then they will work with you to formulate a plan that will help you to achieve what you want from your finances.
The major differentiating factor between a financial planner and a financial advisor is that a financial advisor will only focus on the money and task that is assigned to them while a financial planner will focus on your goals and your financial well-being.
A financial planner will make sure that you are in full control of your financial situation. Additionally, they will also provide you with awareness, clarity, and confidence in your financial future. The roadmap created by a financial planner will guide you through every hurdle that comes your way.
It also helps to show your current position, and where you want to reach in the future, and how to successfully execute the strategy that has been created. A financial planner may also have certain areas of expertise, such as retirement planning or education funding planning.
How To Choose Between A Financial Advisor And A Financial Planner
Depending on your needs and financial situation you will have to decide between choosing a financial advisor or a financial planner.
But before choosing any one of them it is necessary to take precautions and do your research. If you are choosing a financial planner you should not only ask them about their experience but you should look for their Certified Financial Planner Certification. This way you can be 100% sure about their expertise.
Similarly, you can ask a financial advisor about their certification and what knowledge they have. A recommended method of choosing a financial advisor is to visit the CFP website to find out a certified advisor or planner.
Now comes the real question of whether you should choose a financial advisor or a financial planner. It will largely depend on your preference, for example, if you simply want to open a pension account or an ISA you should choose a financial advisor. They will instantly guide you through the process and open an account.
On the other hand, if you want to plan long term you should consult a financial planner that can understand what your goals are and how you want to achieve them. They will answer your questions more patiently and help you to make the right financial decisions at the right time.
Just remember to vet them properly, by checking their certification, qualification and asking any questions about the doubts you have in your mind.
Should I Contact A Firm In My Locality?
Yes, you can always contact a financial firm in your locality to get trusted advice or consultation. One such firm is Worthy Financial, they have been providing investment options with good returns. Their offerings such as Worthy Bonds are a great way to grow your wealth and help small businesses to grow.
If you want to avail of award-winning financial investment services you should contact Worthy Financial in Halifax, NS.