Financial Planner vs. Financial Advisor: Know the Difference
There may come a point in your financial journey when you’d like to seek professional input, advice or counselling to manage your and/or your family’s present and future wealth. The sooner you have a financial plan, the greater the likelihood you will succeed in reaching your long-term financial objectives.
As you search for the financial guidance you need, you will find dozens upon dozens of titles used by finance professionals, including “stock broker,” “registered representative,” “wealth planner,” “tax planner,” “accountant,” “estate planner,” “private banker,” and on and on, all vying for your business.
Many of these titles are very service-specific; however, for some like Financial “Planners” and Financial “Advisors,” the titles are not very helpful in clearly discerning the services provided. In this article we will help you understand the differences.
Financial Planner and Financial Advisor—seemingly Similar but Not!
The titles of Financial Planner and Financial Advisor are both widely used by financial professionals who help clients manage their finances. Seemingly similar titles but not, the initial client relationship term and the means of compensation can often help you distinguish between the two.
A Financial Planner typically takes a long-term holistic approach to advising clients on a comprehensive financial plan, and are compensated on a fee-for service basis.
On the other hand, a Financial Advisor is more typically a provider of a specific financial service, such as investment brokerage, tax, accounting, investment funds, insurance and estate planning services, among others. While a few may also provide an overall financial plan, their services are more often product sales/commission-driven.
The Financial Planner—a Closer Look
A Financial Planner considers all aspects of a client’s fiscal circumstances, including income, savings, debt, stage of life, retirement planning, estate planning, philanthropy and more, to establish a plan to achieve the client’s long-term financial goals.
The Financial Planner may “plan,” but then provide you with referrals to financial experts to effect specific elements of the plan. The Financial Planner will act as your intermediary with these in-house or third-party financial service providers, monitoring their progress against the overall plan and reporting to you on a regular basis.
It is often the case that the Financial Planner is a CFP (Certified Financial Planner). To obtain the CFP designation, they have to complete a financial planning program and pass an exam, as well as have obtained at least three years of related experience. The program covers all aspects of personal financial management and planning. A CFP is held to the standard of a fiduciary to his or her clients, and as a fiduciary, a CFP is legally bound to act in the best interests of clients at all times.
The Financial Advisor—a Closer Look
The term Financial Advisor can be applied to anybody who helps you manage any aspect of your finances. This could include an employee of your financial institution, stock broker, or registered representative, as well as a lawyer, accountant, insurance advisor, investment manager, among others.
Financial Advisors employed by financial institutions are generally product-oriented. They may sell investment products or insurance. Since their primary role may be on the selling side, they may not always offer advice on financial planning. If they do, it is often limited in scope and relative to the products they are selling.
Independent Financial Advisors can include any and all other providers of financial services you may need. These may include Estate lawyers, Tax Lawyers, Tax Accountants, Insurance Professionals, Investment Managers, Philanthropic Consultants and others whose professions require their own adherence to the higher standard of fiduciary responsibility to act in their clients’ best interests.
Financial Planner or Financial Advisor—Which is Best For You?
If you are not confident in your understanding of financial products and services, then it may be best for you to work with a fiduciary, such as a Certified Financial Planner. This will provide you with the comfort and confidence that all your financial needs are being considered in a long-term comprehensive plan, with full transparency of fees and referral relationships, and always in your best interests.
Conversely, if you are financially sophisticated and know the investment products or services you want, you may feel confident enough to purchase them directly from a trusted Financial Advisor. There is also the option of directly employing other financial service providers as you need them. However, no matter your level of financial knowledge, this will become quite time consuming and you may benefit from engaging a Wealth Manager (a Financial Planner capable of dealing with the complexities of greater wealth).
In either case, you should be diligent in selecting the Financial Planner, Financial Advisor or Wealth Manager you entrust with your financial assets to ensure you are working with one who will act in your best interests at all times.
Clarification is Coming
On February 28, 2022 the Financial Services Regulatory Authority of Ontario (FSRA) issued new guidance on regulating the use of the titles “planner” and “advisor” in Ontario. The new guidance will give the FSRA enforcement authority over individuals who use regulated titles without an approved credential. The final rules were presented to the Minister of Finance for approval in January. Once the rules are approved and the new legislation has passed, this new guidance will take effect.
Preserve and Build Your Wealth with Bloom
At Bloom Investment Counsel, Inc. we are not Financial Planners or Financial Advisors—we provide independent solutions for our clients’ investment needs.
Our personalized investment portfolios are constructed to meet each client’s unique goals. You and your family’s financial situation is private, personal and unique—and your investment portfolio should be too.
We are happy to work with you and your trusted financial professionals such as Financial Planners and/or Financial Advisors to protect and build your family wealth.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.