Financial Planner vs Financial Advisor: What’s the Difference?

When it comes to managing our finances, many of us seek professional help. However, the terms "financial planner" and "financial advisor" are often used interchangeably, leading to confusion.

Are they the same thing? Or are there significant differences between them? In this article, we'll take a closer look at these two professions and highlight what sets them apart in the Australian financial landscape.

In short, financial planners and financial advisors both offer financial guidance, but the scope of their services and qualifications vary.

Financial planners are typically trained to provide comprehensive financial planning services encompassing investment, tax, insurance, retirement, and estate planning.

On the other hand, financial advisors may specialise in one or more of these areas, or they may focus solely on managing investments.

In Australia, financial planners must hold an Australian Securities and Investments Commission (ASIC) license, while financial advisors may or may not have this credential.

If you're looking for professional financial guidance, it's important to understand the key differences between financial planners and financial advisors. By knowing what each profession offers and what qualifications to look for, you can make an informed decision about which one best suits your needs.

So, whether you're planning for retirement, managing investments, or seeking guidance on other financial matters, keep reading to learn more about the differences between financial planners and financial advisors in Australia.

Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.

Financial Planner vs. Financial Advisor: An Overview

If someone is having trouble managing their finances, they will typically seek the assistance of a professional. Both "financial advisor" and "financial planner" refer to professionals who assist customers in better managing their own finances.

A diverse array of specialists work in the financial sector, including insurance agents, accountants, investment advisors, brokers, and financial planners, among others.

The term "financial planner" can refer to any sort of financial advisor; however, the term "financial advisor" does not apply to every kind of financial advisor.

What Makes a Financial Planner Different from a Financial Advisor?

The term "financial advisor" refers to any expert who, in one way or another, can provide assistance with the management of one's own finances.

On the other side, a financial planner is a type of financial counsellor who specialises in a particular subfield of finance, like financial planning.

1. Financial Planner

If formulating a strategy to achieve your long-term monetary objectives is one of your primary objectives, then it is highly recommended that you seek the assistance of a professional financial planner.

You can search for a planner who specialises in tax planning, investment planning, retirement planning, or estate planning. You might also ask the planner about their credentials, like Certified Financial Planner (CFP) or something similar.

A Certified Financial Planner (CFP), a Certified Investment Management Analyst (CIMA), a Chartered Financial Analyst (CFA), and a Chartered Financial Consultant (ChFC) all contain specific levels of education, testing, and professional experience to get their respective credentials.

2. Financial Advisor

A financial advisor is a professional who can assist you in managing your finances and is referred to by the more general phrase "financial advisor."

They could act as a broker for the trade and acquisition of your stocks, handle your investments, and assist you in developing an all-encompassing estate or tax strategy.

In order to provide services to members of the general public, a financial advisor needs to be in possession of a valid AFS licence.

It's possible that he or she has other certifications as well, depending on the services offered.

It is to the customer's great advantage to work with financial advisors that are also Certified Public Accountants (CPAs).

Key Differences

Although these two categories frequently overlap, one can consider a financial planner to be a form of a financial advisor. To be more specific, a financial planner is a type of expert that works with people or organisations to assist them in meeting their long-term financial objectives.

Among these are preparations for retirement, saving for a child's college education or the down payment on a property, and other similar endeavours.

For investments with relatively lengthy time horizons, a financial planner will rely on tactical portfolio allocation to ensure that anticipated returns and risk tolerances are in harmony.

Conversely, the phrase "financial adviser" refers to somebody who might be engaged in this kind of planning in addition to other aspects of financial management or financial goods. This is because "financial advisor" refers to a broader concept. They might, for instance, offer services in banking, real estate, or accounting; they might also assist with the placement of short-term trades and give life insurance.

Would you like to speak to Klear Picture retirement specialist? Book a discovery session by calling: (03)99981940 or email on team@klearpicture.com.au.

Particular Considerations

Most people who need assistance with their finances will seek the services of a financial planner, a more specialised form of a financial counsellor. But, before deciding on the "kind" of financial planner you should hire, you should do some research.

It is vital to research and investigates a potential financial planner's qualifications before engaging them to assist you with managing your finances.

This includes determining whether or not they hold a valid licence and how long they have been in business. Make sure to ask the planner specific questions about their education and credentials, including whether or not they concentrate on estate planning or tax planning, for example.

Also, customers should be aware of how the financial planner is paid and what they can expect to receive in exchange for their business.

For instance, is the cost of the financial review consist of a single, one-time payment, or are there additional charges incurred if the investment allocation or the plan itself is modified?

It is essential to make sure that your financial advisor's recommendations and investments align with your comfort level with taking risks and your long-term monetary objectives.

When conducting due diligence on a potential financial planner, you might want to consider compiling a list of inquiries. Last but not least, before hiring a financial planner, make sure you research their disciplinary history and speak with some of their previous clients.

It is essential to keep in mind that all experts who provide advice on retirement planning or who develop retirement plans are held to a specific standard, both legally and ethically.

Breaking Down the Fees

Before attempting to employ a financial advisor or planner, it is essential to understand the kinds of services you require clearly. In this way, you won't have to worry about not being aware of what you're paying for in advance. When your financial planner or advisor shows you the breakdown of costs, it will also be simpler for you to comprehend it.

1. Planners

It is possible that your financial planner will charge you a portion of the assets under their management if they are delivering an ongoing service to you. In addition to that percentage, some businesses charge either a flat amount or an hourly rate for their services.

2. Advisors

The common form of remuneration for financial advisors is one of these three approaches. This will be broken down into its component parts so that you will be well-prepared to go shopping when the time comes.

1. Fee-Only

You pay the financial advisor a fee for every service they carry out for you when you use a fee-only service.

If your financial advisor describes their services as "fee-only," you have the right to require them to present you with a description of the services they offer and a breakdown of the fees associated with those services.

These industry experts don't use any sales gimmick, and the services they provide are typically straightforward and to the point.

2. Fee-Based

Financial advisors that work on a commission basis will charge you an up-front fee in addition to earning a commission on any financial products you buy from them.

These industry experts will most likely give you the hard sell as they attempt to offer you more expensive versions of the things that you already require.

3. Commission

Commission-based advisors can only make money off the items and services their clients purchase from them. They are often compensated by means of a third-party organisation. When these industry experts offer you several financial solutions for your portfolio, you can anticipate a sales pitch and possibly even some pressure to decide.

Advice for Those Looking to Employ a Financial Planner

1. Determine Your Financial Needs and Goals

Before beginning your search for a financial advisor, you must evaluate your wants and objectives regarding your money. Think about things like your income and expenses, as well as your assets and obligations, as well as your long-term financial goals.

This will assist you in finding a financial planner that is able to offer you the necessary services and knowledge in your particular situation.

2. Look for Qualified and Accredited Professionals

Be sure the financial adviser you select has the necessary qualifications and is accredited by a professional organisation that is well known.

The Financial Planning Association (FPA) and the Association of Financial Advisers are the two primary organisations in Australia that are responsible for the accreditation of financial planners (AFA). Before choosing a financial planner, it is important to investigate their credentials, experience, and track record.

3. Understand the Financial Planner's Fee Structure

In most cases, the fees charged by financial planners take the form of a flat amount, an hourly rate, or a percentage of the assets being managed. Before hiring a financial planner, you should ensure you clearly understand the fee structure and the expenditures associated.

Furthermore, consider any hidden fees, such as commissions or referral fees, which may impact the suggestions provided by the financial planner.

4. Ask for Referrals and Recommendations

Ask people you know, such as family members or coworkers, for names and suggestions of reliable financial advisors they have worked with in the past. You can also obtain an indication of a financial planner's reputation and track record by reading reviews and ratings of them online, which can be found on many websites.

5. Evaluate the Financial Planner's Communication Skills

A good financial planner must be a great communicator who is able to communicate complicated financial concepts and methods in language that the client easily understands.

You should look for a financial planner who will address your issues, respond to your queries, and communicate in a proactive and honest way.

6. Determine the Financial Planner's Specialisation and Expertise

Investment management, retirement planning, tax planning, estate planning, and risk management are just a few of the services included in financial planning, which incorporates a vast range of other services.

Be sure the person you pick as your financial advisor has the specialisation and experience you need for your specific financial needs and objectives.

7. Consider the Financial Planner's Availability and Accessibility

Make sure the financial adviser you employ is available and easy to contact whenever you need their assistance. Think about things like the location of their office, the hours it's open, and the different ways you can contact them. Additionally, consider how responsive and accessible they are in the event of unexpected events or time-sensitive financial concerns.

8. Check the Financial Planner's Compliance and Disciplinary Record

Verify the compliance and disciplinary record of the financial planner with regulatory agencies like the Australian Securities and Investments Commission (ASIC). Check to see that the person handling your finances has a spotless past, free of any unethical or improper activity.

Bottom Line

In conclusion, while seeking the assistance of a professional to manage your finances, it is essential to have a solid awareness of the distinctions between a financial planner and a financial adviser. There are important distinctions between the two roles, despite the fact that the phrases can sometimes be used interchangeably.

A financial planner primarily focuses on helping you establish a complete financial plan that analyses your goals, risk tolerance, and overall financial condition. On the other hand, a financial advisor often gives you advice on investments and assists you in managing your investment portfolio.

The Australian Securities and Investments Commission (ASIC) is the body responsible for regulating financial planners and advisors in Australia. This body is also responsible for establishing professional behaviour and qualification standards. Collaborating with a certified expert with a proven track record who can offer individualised guidance to cater to your particular requirements is necessary.

Are you interested in having someone assist you in creating a long-term financial strategy or in managing your investment portfolio? It is essential to your success in finding the appropriate expert to fulfil your requirements that you are aware of the distinctions between a financial planner and a financial advisor.

Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.

Content Summary

• The terms "financial planner" and "financial advisor" are often used interchangeably, leading to confusion.
• In short, financial planners and financial advisors both offer financial guidance, but the scope of their services and qualifications vary.
• In Australia, financial planners must hold an Australian Securities and Investments Commission (ASIC) license, while financial advisors may or may not have this credential.
•  If you're looking for professional financial guidance, it's important to understand the key differences between financial planners and financial advisors.
• By knowing what each profession offers and what qualifications to look for, you can make an informed decision about which one best suits your needs.
• If formulating a strategy to achieve your long-term monetary objectives is one of your primary objectives, then it is highly recommended that you seek the assistance of a professional financial planner.
• You can search for a planner specialising in tax, investment, retirement, or estate planning.
•  A financial advisor is a professional who can assist you in managing your finances and is referred to by the more general phrase "financial advisor."
•  Despite the fact that these two categories frequently overlap one another, one can consider a financial planner to be a form of a financial advisor.
•  Conversely, the phrase "financial adviser" refers to somebody who might be engaged in this kind of planning in addition to other aspects of financial management or financial goods.
• But, before deciding on the "kind" of financial planner you should hire, you should do some research.
•  It is vital to research and investigates a potential financial planner's qualifications before engaging them to assist you with managing your finances.
•  It is essential to ensure that your financial advisor's recommendations and investments align with your comfort level with taking risks and your long-term monetary objectives.
•  When conducting due diligence on a potential financial planner, you might want to consider compiling a list of inquiries.
•  Before attempting to employ a financial advisor or planner, it is essential to understand the kinds of services you require clearly.
• When your financial planner or advisor shows you the breakdown of costs, it will also be simpler for you to comprehend it.
•  You pay the financial advisor a fee for every service they carry out for you when you use a fee-only service.
• If your financial advisor describes their services as "fee-only," you have the right to require them to present you with a description of the services they offer and a breakdown of the fees associated with those services.
•  Financial advisors that work on a commission basis will charge you an up-front fee in addition to earning a commission on any financial products you buy from them.
•  Before beginning your search for a financial advisor, you must evaluate your wants and objectives regarding your money.
• Before hiring a financial planner, you should ensure you clearly understand the fee structure and the expenditures associated.
• Furthermore, consider any hidden fees, such as commissions or referral fees, which may impact the suggestions provided by the financial planner.
•  Ask people you know, such as family members or coworkers, for names and suggestions of reliable financial advisors they have worked with in the past.
•  A good financial planner must be a great communicator who is able to communicate complicated financial concepts and methods in language that the client easily understands.
• Be sure the person you pick as your financial advisor has the specialisation and experience you need for your specific financial needs and objectives.
•  Ensure the financial adviser you employ is available and easy to contact whenever you need their assistance.
•  Verify the compliance and disciplinary record of the financial planner with regulatory agencies like the Australian Securities and Investments Commission (ASIC).
• Collaborating with a certified expert with a proven track record who can offer individualised guidance to cater to your particular requirements is necessary.
• It is essential to your success in finding the appropriate expert to fulfil your requirements that you are aware of the distinctions between a financial planner and a financial advisor.