Financial advisor versus financial planner: what’s the difference? | Financial advisers


A rose by any other name can still be a rose, but is a financial advisor who calls himself a financial planner still a financial advisor? This is the real question.


The difference between a financial advisor and a financial planner is a debated topic in the financial services industry, but with little success. Part of the problem is that there are no federal securities regulations that advisors can use.

Unlike the legal or medical industry, anyone can call themselves anything in the financial industry except industry certifications. Some of these certifications include a certified financial planner, known as a CFP, or a chartered financial analyst, commonly known as a CFA, says Ric Edelman, founder of Edelman Financial Engines.

That said, there are some common differences between a financial advisor and a financial planner, including:

  • Financial advisers are more likely to focus on managing investments, while planners take a more holistic approach.
  • Financial advisers tend to take a narrower view when providing financial advice than financial planners.
  • Financial planners generally build longer-term relationships with investors than financial advisers.
  • Investors tend to view professionals who claim to be planners as more accessible than advisers.

Financial advisor vs financial planner

Just because the difference between financial advisor and financial planner is ill-defined doesn’t mean advisers should be called whatever they see fit.

As a financial professional, you want to make sure that your title accurately projects the services you provide to your clients, says John Diehl, Managing Director of Applied Knowledge for Hartford Funds, because when expectations don’t match, there are misunderstandings. potentials and problems are likely to occur. to follow.

“How you market yourself depends on who you want to serve and how you want to serve them,” says Edelman.

The services you provide to clients often boil down to the distinction between two of the most common titles in the industry: the difference between a financial advisor and a financial planner. Two terms that have been so overused, “It can be difficult for those wishing to join the industry, as well as those seeking the services of a professional, to understand the difference,” said Kevin Keller, certified association director. and CEO of the board of directors of the CFP. . For this reason, he finds that financial references such as the CFP and CFA can help aspiring advisors and consumers differentiate between professionals.

While the distinction between financial advisor and financial planner may be blurry to consumers, many finance professionals have a clear idea of ​​what it means to be an advisor versus a planner. Advisors often focus on managing investments, while planners take a more holistic approach to helping clients.

“A financial advisor will likely be someone more interested in markets and securities,” says Diehl. A financial planner would be “more interested in the whole process, from collecting personal information to implementing and monitoring a plan.”

Financial planners can also manage investments, but they do so from a broader perspective, as opposed to the narrower focus of an advisor. “Financial planners would say that without addressing these topics, we cannot offer effective investment solutions,” said Edelman. “It would be like a doctor prescribing drugs without first doing any tests and without making a diagnosis.”

He points out that as a result, “many financial planners also serve as investment advisers, but very few investment advisers serve as financial planners.”

Financial professionals may have a clear definition of financial advisor versus planner in mind, but consumers often take a different perspective. “Advisor seems more official,” says Sarah Johnson, spokesperson for, a software and services comparison site for small businesses. “I would trust an advisor more than a planner.”

Johnson is currently working with a client advisor and says she prefers that title over the other two. “It shows it’s very personal,” she says. “A financial advisor is such a broad term. You could be a financial advisor for anything and anyone. But a client advisor makes it seem like we’re more of a one-on-one. “

A financial advisor is like “someone who deals with wealthy people,” says Jess Todtfeld, communications trainer and speaker in New York City. “A financial planner can be someone who helps people budget, get out of debt, and plan to help save for college and retirement.”

Others have a different point of view. “My perception is that a financial advisor provides resources and advice on how best to manage my money in the short term versus a financial planner who invests and takes action to help me make investments and opportunities at longer term and more important, ”says Charn Pennewaert, founder of Media Stream Marketing.

Financial planner: the most misused title of all

Since the title of financial planner is overused, it’s important to look for an accredited designation after a professional’s name, like CFP brands, says Keller. The CFP Board of Directors supports the large-scale regulation of titles similar to those in the legal and medical industry.

Currently, the only financial regulation that exists for who can call himself a financial planner is at the state level. “An example is in Nevada: if you call yourself a financial planner, you have to operate on a fiduciary level,” says Keller.

Much of the debate between financial advisor and financial planner has revolved around whether or not you are a fiduciary advisor, says Diehl. A financial planner “probably has a fiduciary responsibility to put the best interests of his client first.”

The Labor Department attempted to counter federally regulated fiduciary financial planners with its fiduciary rule, but was unable to go to court. Financial planners are only regulated in relation to the other services they provide. For example, an accountant who calls himself a financial planner would be regulated by a state accounting board.

Advisor versus Advisor

From there, the realm of professional designations in the financial industry only becomes more murky. If the distinction between advisor and planner was not obscure enough, there is an even more finicky debate around advisor and advisor.

If you looked up these terms in the dictionary, it would tell you the same thing. Both are defined as “a person who gives advice in a particular area”.

According to the Oxford English Dictionary, “Both the spelling advisor and the advisor are correct. The advisor is more common, but the advisor is also widely used, especially in North America. The counselor can be seen as less formal, while the counselor often suggests a formal position. “

Google may disagree on their relative popularity. According to his Ngram Viewer, which follows the terms in the books, while the financial advisor first appeared on the literary scene some 50 years after the advisor, the -or version surpassed-in popularity in the 1990s and has since gained traction. land in modern use.

For financial advisers, there is one authority greater than the dictionary: the Investment Advisers Act of 1940. Note the use of the -er spelling here. This is the only version you will find in the Securities and Exchange Commission legal documents.

The Investment Advisers Act of 1940 defined the criteria for an investment adviser. He says anyone who provides investment advice or gives investment recommendations is an advisor and should register with the SEC, regardless of how you spell the title after your name. This law requires that companies or independent practitioners paid to advise others on securities investments must be registered with the SEC.

Where the SEC draws the line is the misleading headlines. The law states: “It is illegal for any registered investment company to adopt as part of the name or title of that company, or of any security of which it is the issuer, one or more words which the Commission considers to be materially. deceptive or deceptive. “

Should I become a financial advisor or a financial planner?

Headlines are a marketing tool. What you call yourself or your business calls you sends a message to potential customers about who you are and what you do. In his job as an Atlanta-based communications specialist working primarily with professional and financial services, Drew Plant is often found helping clients “balance the real and legal meaning of the terms with the perceptions of the clients.”

“I always advise them not to lose sight of customers’ perception of words,” he wrote in an email. “For example, if a client tends to use a financial advisor generically and broadly, but naturally understands that you are in fact a financial planner, you don’t need to struggle and correct.”

Whatever your title is, hopefully by the end of your first meeting with a client, both of you will have a clear understanding of the services you provide.


Comments are closed.