If you are looking to hire someone to help you with some aspect of your financial situation, who do you look for? There are numerous job names and categories within the financial industry. And it can be hard to understand who is who and the differences among them, especially financial planner vs. financial advisor. And many times, these are used interchangeably.
Many resources have their own definition so you most likely will get differing opinions. But here is our definition of these varying roles. We also include when to seek advice from them.
What is a financial planner?
A financial planner is someone who helps their clients meet their financial goals. They do this by taking a holistic approach, looking at all aspects of their financial portfolio. They analyze the client’s goals, risk tolerance, stage of life and other factors that can contribute to their financial situation.
Financial planners typically work in a variety of different areas. They have a broad-based perspective because their work is more comprehensive. They have expertise in a lot of different areas from retirement planning, to managing risks. Financial planners also work with individuals who have assets and would like advice on what to do with those assets.
You may have heard of certified financial planners. Did you know that not all financial planners are certified?
To be a certified financial planner, you need to go through a rigorous program. Then, you must pass a comprehensive test. You also need to have worked in the financial industry for a certain number of years.
Finally, an oversight board governs all certified financial planners. This board is strict when it comes to ethics. So, when you’re working with a certified financial planner, you can feel more confident, comparatively, that they’re above board and doing the right things ethically. It’s just an added level of protection that will provide you peace of mind.
Financial advisors are generally product-oriented. These individuals may sell investments or insurance. Since their role is on the selling side, they don’t typically offer advice on financial planning. If they do its often limited in scope. Instead, they work as registered representatives or a broker.
What’s a fiduciary?
A fiduciary is a financial expert who works for you. They don’t work for an investment or an insurance company. Instead, they’re able to provide advice based on your best interest.
One important distinction to note is that compared to all of the people who work in the financial industry, few are fiduciaries. In fact, fiduciaries make up less than five percent of all the people working in the financial industry.
If you’re not financially savvy, then your best bet would be to work with a fiduciary. They’ll point you in the right direction based on your personal financial situation. However, if you’re financially sophisticated and can understand the pros and cons of all the financial products available, a non-fiduciary will work well. They can provide information and act as a sounding board for you.
Other financial roles
There are other roles in the financial industry that you may be aware of.
A financial consultant typically works with businesses. Their role is to address a specific problem. The consultant will review the situation and provide the company with their recommendation on how to proceed. They are independent and do not get involved with the business’s day-to-day financial operations.
You would work with a financial coach if you don’t have many assets. Financial coaches can offer strategies for saving money, uncovering habits that tend to waste money that you could be saving. They can provide information on what you’re doing wrong. For example, they could help you rectify the situation if you have high credit card debt. Or they’d be the people to turn if you just want to get better educated on finance and get yourself into a better financial situation.
So, Who Ya Gonna Call…
Before you call one of these experts for help, you need to be clear on what your needs are and what financial assistance you want. With that being said, the above descriptions are general and aren’t all inclusive. The lines are often blurred. For example, you may encounter a financial planner who also does investment and insurance management. But others may include other financial experts to help with these and other financial aspects like estate planning. Be sure you know what you need help with before you speak with a professional.
Listen to our podcast to get more insight into the differences.