Financial Planner vs. Financial Advisor: Is There a Difference?

The terms “financial planner” and “financial advisor” may seem interchangeable because both are professionals dedicated to providing financial advice to consumers. But financial planners typically focus on the big picture, creating overall money strategies, while financial advisors offer guidance in specialty areas, such as managing an investment portfolio.

Understanding the similarities and differences between the two can help you choose the right expert to improve your financial health while meeting your long-term needs.

What is a financial planner?

A financial planner is a professional who works with clients to define short- and long-term goals, and then creates actionable steps to meet those goals. Services may include budgeting, managing debt, planning for retirement, developing tax strategies and more.

The focus of a financial planner tends to be broader than a financial advisor, who concentrates on one area of finance.

Notably, the field of financial planning isn’t regulated, which means anyone can claim to be a financial planner.

However, working with a certified financial planner (CFP) may be a safer choice because certification requires meeting rigorous standards involving education and experience. Also, CFPs must adhere to the fiduciary standard — in other words, they put their clients’ best interests above their own profits.

You can typically find a CFP through an investment firm or brokerage. Some online and traditional banks may offer financial planning services as well, usually if you meet specific criteria.

Working with an independent financial planner is also an option, especially if you get a referral from colleagues, friends or family members.

Financial planner pros and cons

What is a financial advisor?

A financial advisor typically helps clients with a specific area of their finances, such as investments, retirement savings, taxes, estate planning or insurance needs. Financial advisors may work independently, or with an established bank or brokerage company.

Similar to financial planners, financial advisors have no universal licensing requirements. However, those who sell investment products are generally required to register with the Securities and Exchange Commission (SEC), while insurance agents need to meet state regulations.

Working with a licensed financial advisor can provide an extra layer of security because licensing requires rigorous training and certifications.

Note that financial advisors may follow the “suitability standard,” which means the advisor’s decisions must be suitable and fair for the investor’s circumstances. However, this doesn’t mean that a financial advisor’s decisions are necessarily the best for the client’s long-term goals and comfort with taking risks.

Financial advisor pros and cons

Financial planner vs. financial advisor: Key differences

While financial planners and financial advisors both provide financial advice and services to individuals and companies, they differ in several ways. Key differences between the two include:

• Level of expertise

  A financial planner uses a big-picture approach, similar to a general practice doctor, considering all aspects of your life to create a robust plan to take your finances to the next level. In comparison, a financial advisor typically focuses on one area in the financial field, such as investing strategies to maximize your retirement savings. You may decide to use a financial planner to create a comprehensive plan and then implement sections of that plan with specialized financial advisors.

• Fiduciary duty protection vs. suitability standard

  Thanks to the fiduciary duty protection, certified financial planners are legally required to prioritize their client’s best interests over their own profits. This can give clients an extra layer of reassurance, knowing their finances are in safe hands. In contrast, financial advisors may follow the suitability standard, which requires only that recommendations be “suitable” for the investor’s circumstances. This could lead to decisions that are not aligned with the client’s long-term goals.

• Compensation

  Financial planners generally offer several payment options, such as hourly, fixed fee, retainer or commission. This allows you to pick which payment structure works best for you and your long-term goals. While some financial advisors may offer different compensation plans, they typically charge a percentage for managing assets or earn commission when selling financial products. Costs for each can vary greatly. Gathering quotes and pricing structures can help you decide whether to go with a financial advisor versus financial planner.

Choosing between a financial planner and financial advisor

When to choose a financial planner

If you have multiple financial goals or need help managing various aspects of your financial life, a financial planner might be a better fit than a financial advisor.

“Planners are well-equipped to help identify and prioritize goals, apply concurrent solutions that work in harmony, and then manage for best outcomes,” says Jessica L. Villagrana, financial advisor and certified financial planner with financial services firm Edward Jones.

While many financial planners offer broad and generalized support, some provide niche services, such as planning for retirement or tax strategies. You have to know your financial goals and find a professional who aligns with them.

Villagrana advises consumers to interview two or three potential planners from different firms. Look for someone who will fit your communication style and help you stay committed to your growth strategies.

“Think of it as a financial marriage,” Villagrana says.

The good news is that most firms offer a free introductory session to see whether their services will meet your needs.

When to choose a financial advisor

If you need help with a specific area of your finances, such as exploring investment strategies or managing your portfolio, a financial advisor may be valuable.

“Financial advisors are great for new investors starting to build wealth,” Villagrana says. “However, as wealth builds and life becomes more complex, investors may eventually need a financial planner.”

When choosing an advisor, ask what you can expect to pay yearly for services, Villagrana says. At the same time, avoid reviewing the advisor’s investment performance records.

“Your required rate of return will be determined by your goals, timeline, risk tolerance and existing resources,” she says.

Ultimately, your financial professional’s task is to help you achieve your financial goals, which will likely differ from other clients’ goals.

If you decide that you want a blend of what a financial advisor and a financial planner have to offer, you’re in luck. Many financial advisors, such as Villagrana, also hold a CFP certification. Professionals with multiple qualifications may be better equipped to meet certain clients’ needs as their financial circumstances and long-term goals evolve.

How to find a financial planner or financial advisor

When shopping for a financial planner, you can consider factors such as credentials, specializations and referrals.

The Certified Financial Planner Board of Standards provides a CFP lookup tool where you can verify an individual’s current and past certifications, as well as any legal or disciplinary actions taken against them or their organization.

The Financial Planning Association (FPA), a nonprofit organization, allows you to search for CFPs in your area with its PlannerSearch tool.

The BrokerCheck tool, designed by the Financial Industry Regulatory Authority (FINRA), allows you to vet registered financial advisors to find a good fit for your needs.

Be sure to consider the different types of financial planners and their areas of expertise. For example, some CFPs add certifications to better serve their clients, such as becoming a Chartered Financial Analyst (CFA) for investment strategies, a Certified Private Wealth Advisor (CPWA) for high-net-worth clients, or a Certified Divorce Financial Analyst (CDFA) to assist clients with the financial aspects of divorce.

Here are some popular financial institutions to consider when looking for financial planning services. You can also look into private banking to see what financial services are available.