Managing money is a big part of life but can be confusing. Many people hear terms like financial planning vs financial advisor and wonder if they mean the same thing. While they sound similar, they serve different purposes.
It is important to understand the difference. Financial planning focuses on creating a strategy for your money. Meanwhile a financial advisor is a professional who guides you through specific financial decisions.
Let's break down financial planning vs financial advisor to help you understand what separates them.
Who is Financial Planner?
Financial planning is about creating a plan of action for your money. A financial planner helps you determine your current and desired financial position.
A financial plan covers many areas:
- Budgeting and saving to manage your income and expenses.
- Investing to grow your wealth over time.
- Retirement planning to secure your future.
- Tax planning to reduce your liability.
- Estate planning to manage your assets and protect your family.
The goal is to take control of your finances in the short and long term. A good plan can help you make smarter money decisions, stay on track, and achieve your financial goals. Many planners have special certifications, like Certified Financial Planner (CFP). It shows they have the training and skills to handle complex financial situations.
People often turn to financial planning during major life changes. This could be:
- starting a new job
- buying a house
- preparing for retirement
- getting married/divorced
- having children/grandchildren
Whether you do it yourself or work with a professional, financial planning provides structure and clarity.
Who Is a Financial Advisor?
A financial advisor helps you manage your money. They guide you through important financial decisions and provide expert advice on investments, insurance, or even tax laws.
A financial advisor offers guidance and advice on investments, tax laws, and insurance. They assess clients’ financial needs and assist them in making informed decisions to accumulate wealth.
You might hire a financial advisor when you need help with a specific issue. For example, choosing the right investments or planning your estate. In financial planning, an analysis advisor may be a Chartered Financial Analyst (CFA).
They work with you to create a plan that fits your goals and needs. You should be careful when hiring a financial advisor. In many cases, anyone can call themselves a financial advisor because the term is not strictly regulated.
Unlike job titles that require specific certifications, people use “financial advisor” broadly. The term doesn’t always indicate a professional qualification. However, securities-working financial advisors must be licensed or registered with the state. This ensures they meet the necessary qualifications and adhere to regulatory requirements safeguarding investors.
The Key Differences Between Financial Planning and Financial Advisors
Financial planning and financial advisors are closely related, but they’re not the same. Here are the differences between financial planning vs financial advisors:
- Services: Financial planning is a process that looks at your overall finances. A financial advisor offers specific advice, like choosing investments or creating a retirement plan.
- Scope: Financial planning is comprehensive. It includes budgeting, saving, investing, and more. Financial advisors often focus on one area, such as estate planning or tax strategies.
- Engagement: Financial planning can be a one-time activity or an ongoing process. Ideally, it should be ongoing as life goals change and plans will need to be updated. Working with a financial advisor usually means hiring a professional for specific tasks or continuous support.
How Do You Choose Between a Financial Advisor and Financial Planning?
Deciding between financial planning vs a financial advisor depends on your needs. Start by thinking about your financial goals and the help you want. This is quick guide to help you decide between the two:
Choose financial planning if:
- You want a big-picture plan for your money.
- You need help with multiple areas, like saving, investing, and retirement.
- You prefer to manage your finances with a clear roadmap.
Hire a financial advisor if:
- You need expert advice on a specific topic, like estate planning or investing.
- You want professional guidance for making key financial decisions.
- You prefer ongoing support to manage your finances.
Also, consider the costs. Financial planning may be a one-time expense, while advisors often charge ongoing fees.
If you’re unsure, you should speak to a professional. They can give you a sense of what you need before you take the plunge. Whatever you choose, make sure it aligns with your goals and budget.
Is It Better to Have a Financial Advisor or Financial Planner?
This depends on your needs. Ideally you should have both. A financial planner would only help you with creating a plan for short- and long-term goals. If you need specific advice about investments or managing your portfolio, you may need a financial advisor.
Can a Financial Advisor Help with Financial Planning?
While financial planning and a financial advisor have two different roles, they can work together. How? Financial planning creates a comprehensive outlook of your entire financial life. However, if you have investments and other income-producing assets, a financial advisor can help you adjusts your plans based on those assets.
For example, an estate planning financial advisor focuses on managing your assets and creating a plan for the future. Others, like financial planning and analysis advisors, help you make detailed plans for saving, investing, and budgeting.
With financial planning, advisors are helpful because they can give you in-depth expertise. It’s common for financial advisors to offer planning services alongside their specific expertise. This overlap can be helpful if you want one person to handle multiple areas of your finances.
When choosing an advisor, ask if they provide financial planning services.
Ensure they have experience in the areas you care about, like retirement or estate planning. This ensures you get the guidance you need. You just need to do your due diligence to avoid issues later. You should aim to work with a financial fiduciary who must act in your best interest.
Work with a Trusted Team for Financial Services
Don’t leave your financial future up to chance. Take control with our certified experts. We work with a team of tax professionals, attorneys, planners, and advisors to help you get a clear, comprehensive picture of your financial future.
Work with the right team today!
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
