Financial planners and financial advisors often have duties that overlap, but there are a few key differences between these two professions. Below, you can learn more about each career separately and how they differ so that you can enlist the proper assistance when it comes to planning your financial future.
A financial advisor, which you may see as a financial “adviser,” is a broad term that refers to a professional who helps customers or clients manage their finances. They may offer their services to assist with various money-related tasks, including selling stocks, buying stocks, managing investments, and creating a tax plan. Specific types of financial advisors may include bankers, estate planners, money managers, insurance agents, and stockbrokers.
Note that if a financial advisor works with the public, they must have a Financial Industry Regulatory Authority (FINRA) Series 65 license. A financial advisor may work with customers privately without this license, but they may not have the knowledge and expertise to offer sound advice.
A financial planner is a professional who helps organizations and individuals achieve their long-term financial goals. They may help their clients develop strategies for retirement planning and general investing, saving, and budgeting. Some financial planners have their own practices and offer their services to individual clients. Others may work for larger organizations like a wealth management firm or bank. Nonetheless, they still offer their services to clients on an individual basis.
The main difference between a financial advisor and a financial planner is the scope of their work. A financial advisor may help clients with both short-term financial tasks and long-term financial goals. On the other hand, a financial planner usually only helps clients with long-term financial goals.
Another key difference between these two professions is the categories into which they fall. Some financial advisors are also financial planners, but this isn’t always the case. Alternatively, all financial planners also count as financial advisors.
Whether you want to hire a financial advisor to help you with long-term or short-term financial goals, here are four questions to ask them so that you can decide if they’re a good fit for your situation and preferences:
Financial advisors tend to take different approaches to investing. Some may focus on achieving growth over the long term, while others may try to achieve large gains within a short period. Neither investing strategy is wrong, but it’s important that you choose a financial advisor who’s familiar with your preferred strategy.
You may also note that financial advisors with less experience may be unfamiliar with how financial markets behave under certain circumstances. On the other hand, financial advisors with more experience may be hesitant to explore newer techniques to achieve financial success. When you’re trying to find a financial advisor to work with, you can ask them about their experiences to learn about their strategies going forward. You may also assess your own risk tolerance so that you can achieve optimal returns without risking too much of your capital.
While we’re talking about money, it’s important to ask your financial advisor about their rates. Some financial advisors charge a fixed fee for their time, while others charge a commission on certain products and investments. For some financial products, it makes sense for a financial advisor to charge a fixed fee. However, you should remain wary of a financial advisor who doesn’t earn a commission on your investments, as they may not be as motivated to offer good advice to you.
If the financial advisor charges a fixed fee, you can be wary if the fee seems abnormally high or low. An abnormally low fee may indicate that the advisor doesn’t have the credentials to be offering financial advice. An abnormally high fee may indicate that the advisor is trying to scam their clients. You can research average hourly rates and commission percentages in your area to ensure that you’re paying a fair rate.
It’s important to learn if a potential financial advisor has qualifications that the financial industry recognizes. For example, you may learn if the financial advisor is a member of the American Institute of Certified Public Accountants or has a bachelor’s degree in business administration, like many of our partners at Pasquesi Sheppard do.
You may consider asking a potential financial advisor about the hybrid robo-advisor services that they use with other clients. Learning about these services can help you choose a financial advisor with confidence, as using this service can help you gain a sense of control and independence over your personal finances. The right financial advisor can explain these services to you and help you stay up-to-date with the most current changes to any trading accounts you have.
If you prefer to work with a live person at all times, you can communicate this desire to your potential financial advisor and see how they react to the request. If they’re willing to meet with you whenever and don’t mind your lack of interest in a robo-advisor service, they may be a good option for you.
While some people may want to manage their finances on their own, doing so can result in lost opportunities. You may make uninformed investment decisions or create tax plans without the proper regulations in mind. It’s best to enlist the help of someone who handles money for a living.
If you don’t already have a financial advisor on your side or are considering switching to a new firm, contact our team at Pasquesi Sheppard. We have a strong team of financial advisors who have expertise in fields like accounting, consulting, tax preparation, attestation, and investing. No matter what your financial needs and goals are, we have someone on our team who’s prepared to help and eager to help you sort your finances.