In the Financial Planning space in Australia the words Financial Planner and Financial Advisor are used interchangeably. At Think Big, we mostly refer to our Financial Planners as Financial Advisors because they each have additional financial skills and training. For example our resident Financial Planner Michael Samu is also a CPA, Tax Advisor and Profit First Professional (among many other things).
It may seem that when people reference a Financial Consultant vs Financial Planner vs Financial Advisor (or any other financial title), that they’re referencing the same person, and you’re not wrong. But, the person you’re asking may not be entirely correct for your needs either.
Getting clear about the specific kind of financial services you’re seeking will help determine the right individual you should hire to handle your finances. A banker, for example, is one type of ‘financial advisor’ that you trust with your day to day finances, expecting your banker to skilfully manage your SMSF (Self Managed Superannuation Fund) is likely to be a risk you don’t want to take. When you need a financial advisor or financial planner for other services, you may get confused trying to decipher what the difference is and how to choose the right type of Financial Professional.
Whether you need someone to help you with your taxes or stocks, or retirement and estate planning, or all of the above, you’ll find your answer here. Keep reading to learn what the difference is between a financial advisor vs planner.
What’s the Difference Between a Financial Planner vs Financial Advisor?
Basically, any professional that can help you manage your money in some fashion can be considered a financial advisor. A financial planner, on the other hand, is a financial advisor within a specified area of interest such as financial planning.
Financial Planner
If your goal is to create a program to meet long-term financial goals, then you probably want to enlist the services of a certified financial planner. You can look for a planner that has a speciality in taxes, investments, and retirement or estate planning. You may also ask about designations that the planner carries such as Certified Financial Planner or CFP.
A CFP along with a Certified Investment Management Analyst (CIMA), Chartered Financial Analyst (CFA), and Chartered Financial Consultant (ChFC) all require different education, exams, and work history.
Financial Advisor
A financial advisor is simply a broad term to describe a professional that can help you manage your money. They may broker the sale and purchase of your stocks, manage investments, and help you create a comprehensive tax or estate plan.
It is important to note that a financial advisor should hold an AFS license in order to serve the public. He or she may also have other credentials depending on the types of services they provide.
Financial Advisors who are also Certified Practising Accountants (CPA), like our team at ThinkBig, add greater benefit to the client.
Breaking Down the Fees
It’s important to know what types of services you need before you try to hire your financial advisor or planner. This way you can be sure you know what you’re paying for up front. It will also be easier to understand the cost breakdown when your financial advisor or planner presents it to you.
Planners
If your financial planner is providing an ongoing service, they may charge you a percentage of those assets which they are managing. Some also charge a flat rate or hourly fee in addition to that percentage.
Advisors
Financial advisors are typically compensated in one of three ways. We’re breaking this down step by step so you can be prepared when you start shopping.
- Fee-Only
Fee-only services are based on each service that the financial advisor provides you. If your financial advisor lists their services as fee-only, you should expect a list of services that they provide with a breakdown of those fees. These professionals don’t offer any sales-pitch and usually, the services are cut and dry and to the point. - Fee-Based
Fee-based advisors charge an upfront fee and then earn commission on the financial products you purchase from them. You can expect a heavy sales-pitch from these professionals as they are trying to up-sell you on the products you already need. - Commission
Commission based advisors only earn money based on the products you purchase from them. They are typically paid through a third party company. Again, you can expect a sales-pitch and maybe even some pressure as these professionals present you with financial options for your portfolio.
Tips for Hiring a Financial Planner
Now that you know what you’re actually looking for in a financial planner, it’s time to actually hire one. But, remember, don’t just hire the first one that promises to serve your needs right. Do a little research first to be sure the financial advisor you hire will be able to take care of you in the long-term.
Referrals
The best place to start is to ask for referrals from family, friends, co-workers, and neighbours that are in a similar financial situation as you. Do they have a trusted financial advisor and how do they like them? Asking for referrals is a good way to get to know a financial advisor before you even meet them so you can have a better idea of how to handle them up front.
Read our client reviews here.
Fee Structures
You should always factor costs into your financial planning scenario. Carefully review the fee structures and ask questions where you have confusion or concern. Make your potential advisor answer these questions to your satisfaction before moving forward.
Certifications
You may be looking for a specialty advisor such as someone that focuses on divorce or insurance planning. Make sure to ask about these certifications right away so you’ll know that you’re headed in the right direction with your financial planner from the start.
Final Thoughts
Remember, it’s not necessarily the difference between a financial planner vs financial advisor. A financial planner is considered a type of financial advisor that holds specific certifications. And, different financial advisors service different areas of the financial spectrum so make sure you’re prepared to ask questions relating your own financial situation before just picking one.
Overall, trust your instincts when making your final decision. Only you can know how well you will trust someone else with your money.
When you’re ready to invest in your financial future with financial services that think like you do, feel free to contact us! Our focus is your financial success.
