What is the difference between a financial planner and a financial advisor? Well, strictly speaking, there isn’t necessarily any difference at all – which can be frustrating.
People – both financial professionals and the general public – often use these terms interchangeably. But if you’re trying to find the right person to help with your retirement, investments, taxes, or any other element of your finances, the type of help you receive matters.
Let me help you sort it out so you can know you have found the best advisor for you.
Titles Can Be Misleading
The issue is that “financial advisor” and “financial planner” aren’t tightly regulated terms. There simply isn’t a universally accepted definition of what each of those are. Just about anyone can call themselves either one regardless of their training, certifications, or the specifics of what they actually do.
However, there are some general guidelines you can start with as you dig deeper.
What a Financial Advisor Typically Does
Financial advisor is a broad term. It can include stockbrokers, insurance agents, bankers, and investment managers. Some may provide holistic financial advice, while others may only help with specific tasks like managing a portfolio. Even still, someone that only sells insurance products can also call themselves a financial advisor. Basically if they do anything related to money… they might call themselves a financial advisor.
There’s nothing wrong with anyone doing any of the above. In fact, those are all necessary services that help a lot of people. I’m simply pointing it out to highlight that you have to look beyond the title to find out what that person actually does. Doing so before you engage their services helps ensure what they do aligns with your needs.
What a Financial Planner (Should) Do
In contrast, when someone refers to themselves as a financial planner, there’s usually (but not always) an implication that they offer more comprehensive guidance and aren’t just focused on selling you a product. A good planner will help you put together a coordinated plan to address the needs you have. At least, that’s what they should do.
Different planners may be generalists or have different focus areas. For instance, some deal exclusively with helping small business owners and the issues they face. Others might specialize in college funding or divorce. For us, it’s retirement distribution planning. That means we address your retirement income strategy, tax planning, investments, estate plan, insurance needs, and more.
But again, because anyone can use that title, it’s really the service they offer that determines whether they’re actually providing financial planning or just using the label.
The Role of Credentials
This is where professional designations can be helpful. In our case, we focus on tax-efficient retirement distribution planning so we hold the following:
- CFP® (Certified Financial Planner): A widely recognized certification that requires extensive education, experience, and adherence to ethical and fiduciary standards. It’s a strong signal that someone is qualified to do comprehensive planning, and is generally considered to be the baseline.
- RICP® (Retirement Income Certified Professional): The emphasis here is on helping clients transition from saving for retirement to living off their retirement savings. It’s one thing to build a nest egg, but it’s another to turn that into a reliable income stream that can last for decades. It’s an important one too considering the number fear among retirees is running out of money.
- EA (Enrolled Agent): This credential is issued by the IRS and focuses on tax preparation and planning. It provides an in-depth knowledge of the tax code, which comes in handy when developing tax-efficient retirement income strategies.
- Certified Financial Behavior Specialist: This adds a layer of understanding around the emotional and behavioral side of money. Because let’s face it – financial planning is just as much about how you feel and behave as it is about math and spreadsheets.
Other advisors who focus on different areas may have other designations. Depending on your needs and the type of advisor you are looking for, do some research to find out what credentials they should hold. FINRA provides a list of designations, but the reality is you don’t need to know them all. I haven’t seen 90% of the ones on this list in the wild. There are probably only a dozen or so that cover the majority of things the general public would need.
Credentials aren’t just letters behind a name. They represent a deeper commitment to learning and getting things right.
How are they registered?
Depending on how they are registered, many financial advisors operate under what’s called a suitability standard. That means they’re only required to recommend something that’s “suitable” for you, not necessarily what’s best for you. That may not sound like a big deal, but it opens the door to potential conflicts of interest if they’re being paid commissions or bonuses based on the products they sell.
I’m not saying everyone that operates that way is absolutely going to get one over on you. Many of these people provide valuable services in an ethical manner. Again, it’s simply something to know as you search.
Others operate as fee-only fiduciary advisors, which means they are legally, not just ethically, bound to provide recommendations that are in your best interest.
We chose to register as independent, fee-only, fiduciary advisors. For us, that means:
- We don’t sell products for commissions.
- We don’t get paid more to recommend one investment over another.
- We don’t work for a brokerage, insurance company, or anyone else with a corporate agenda that influences the work we do for you.
Our only incentive is to help you make the decisions that are best for you.
Advisor? Planner? The Real Question Is: What Do They Do?
Here’s a quick breakdown that might help:
| Title | Typically Includes | But Be Aware |
| Financial Advisor | Investment managers, brokers, insurance agents | Not always comprehensive; may not be a fiduciary |
| Financial Planner | More holistic planning across many areas | The title alone isn’t regulated – look for credentials |
Ultimately, the value comes from how they work with you, not what they call themselves.
Questions to ask a financial advisor or financial planner
Instead of focusing on the title, I encourage people to ask better questions to understand what type of financial professional they are engaging with. Examples of questions to ask a financial advisor include:
- What specific areas of planning do they actually cover?
- What credentials do they hold?
- Are they a fiduciary?
- How are they compensated?
Once you know the answers to those, you’ll have a much clearer picture of whether the person you’re talking to is equipped to help you make thoughtful, informed decisions about the issues you face. But you still need to dig deeper to ask specific questions relevant to the area you need help with.
For example, questions you may want to ask about retirement include:
- Can I afford to retire?
- How much can I safely spend in retirement?
- What’s the best way to take Social Security?
- How can I reduce taxes over the next 30 years, not just this year?
A single investment or insurance product can’t address these questions. They require an integrated plan. That’s why we lead with planning, not products. Your plan should drive your investments, not the other way around.
Final Thoughts
So back to the original question. What’s the difference between a financial planner and a financial advisor? The reality is that the title itself doesn’t tell you much. What matters is the kind of advice and help they actually deliver, and their qualifications to provide it.
To get help from a fee-only fiduciary and make sure that your investments align with your retirement plan, email me at [email protected] or call 903-471-0624 and I’d be glad to help you.
