Financial Advisor vs. Financial Planner
Financial Advisor vs. Financial Planner: What are the differences? Although we use the terms “financial advisor” and “financial planner” frequently interchangeably, these two categories of professionals differ significantly.
Here are some things to consider when choosing between a financial advisor and a financial planner.
What Is a Financial Advisor?
In a nutshell, a financial advisor is a financial professional who assists you in managing your money. financial advisors primarily focus on your investing activities, entailing your investment portfolio.
A financial advisor has to pass the licensure and certification exams to provide investment and financial advice. Financial advisors can assist clients with many financial decisions, such as saving for retirement, purchasing a home, or investing in a business. They can also help clients with insurance coverage and estate planning. However, you still need an attorney to draft any wills or trusts.
What Is a Financial Planner?
Financial planners provide services within a broader scope than financial advisors. As we mentioned earlier, financial advisors are primarily concerned with managing your investment. Financial planners are also involved in clients’ investment decisions. However, they focus on the bigger financial picture.
Financial planners operate in a less formal workplace. They might not always need to pass professional licensing exams, fulfill minimum educational requirements, or have a degree. A financial planner could assist you with creating a budget, saving money, eliminating debt, creating a plan to pay for your retirement and your children’s education, and even creating an estate plan.
Differences between Financial Advisors and Financial Planners
There are some significant differences between financial planners and advisors. However, both of them work with clients and offer professional guidance.
- Many financial advisors help clients over time; some only assist clients with particular transactions or investments. On the other hand, financial planners take a comprehensive approach to client finances and create long-term plans. Their plans take into account every aspect of a client’s financial life. These are typically reviewed every few years, and as plans are updated, client investments or strategies are adjusted.
- Financial planners typically charge hourly or flat fees for their services, whereas financial advisors occasionally receive commissions on investment transactions.
How Do I Know if This Is the Right Financial Advisor or Planner for Me?
Specific factors to think about before choosing:
- Cost; The cost of the advice or professional services shouldn’t be greater than the gain you hope to gain.
- Size of a portfolio; With a financial advisor, this is crucial, but most likely not with a financial planner. Many have small portfolios between $100,000 and $500,000.
- Specializations: If you’re looking for a financial planner to help you pay for your children’s college educations, an insurance agent probably won’t be a good choice.
- Communication; It might be best to move on to the next option if you feel intimidated by the advisor or planner or get the impression that they are challenging to communicate with.
You can begin your search once you’ve decided which services you need. Reduce your options to a few suitable options, develop a list of questions to ask them, and then schedule interviews. Ask for information about their training, qualifications, typical clients, fee structure, investing strategy, and available services. Check their disciplinary history and references to ensure they’re in good standing. Having a capable, affordable, transparent, and compatible advisor is critical.
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