Financial planner vs. financial advisor: what’s the difference, and which should I choose?
Discover the key differences between financial advisors and planners and which one would best suit your specific needs. You can also match with a professional directly for free by answering a few simple questions below.
Summary
Financial advisors and financial planners both offer valuable financial guidance but with distinct focuses.
When choosing a financial advisor or planner, consider your needs as well as their qualifications and fees.
Individuals seeking professional financial guidance can expect to pay anywhere from a few hundred to several thousand dollars annually.
Unbiased can match you with the right financial professional to help you achieve your goals.
What is a financial advisor, and what do they do?
A financial advisor is a professional who provides guidance and recommendations to clients regarding their financial matters.
But what does a financial advisor do?
Their expertise can range from investment advice and portfolio management to retirement planning, tax strategies, and estate planning. They work with clients to understand their financial goals, assess their risk tolerance, and develop a personalized financial plan.
How much does a financial advisor cost?
Financial advisor costs can vary significantly and are influenced by factors like experience, qualifications, and services provided.
Typically, two common fee structures exist: asset-based fees and flat fees.
Asset-based fees involve a percentage, typically ranging from 0.5% to 1.5% annually, charged as a percentage of assets under management (AUM) by the advisor. This structure ensures their compensation grows with your investment success. For a $200,000 portfolio, this could translate to annual fees between $1,000 and $3,000.
Flat fees can be hourly, ranging from $100 to $400 per hour, or annual retainers, typically falling between $6,000 and $10,000 per year.
Learn more about financial advisors fees here.
What is a financial planner, and what do they do?
A financial planner is an expert who takes a holistic approach to managing your finances, creating a comprehensive plan to help you achieve your long-term financial goals.
What does a financial planner do?
A planner goes beyond simple investment advice and considers various aspects of your financial life, including budgeting, saving, investing, retirement planning, insurance, tax planning, and estate planning.
They then create a personalized financial strategy tailored to your individual needs and circumstances.
How much does a financial planner cost?
Factors such as experience, qualifications, and the breadth of services needed influence the cost of engaging a financial planner.
You will generally come across the following fee structures: hourly fees, flat fees, retainer fees, and AUM.
Financial planner costs may be between $150 to $300 per hour for specific consultations or project-based work. For creating a comprehensive financial plan, a flat fee could range from $1,000 to $3,000 or even higher.
Ongoing financial planning and management services often come with a monthly or quarterly retainer, typically between $200 and $500 per month.
While less prevalent for comprehensive financial planning, some planners may adopt an AUM fee structure, charging a percentage, typically ranging from 0.25% to 1% of the assets they manage.
Financial planner vs. financial advisor: what are the differences?
Although financial planners and advisors both aim to help you achieve financial success, their approaches differ.
When comparing a financial planner and a financial advisor, advisors offer specific financial services. In contrast, planners offer more comprehensive services, crafting a more comprehensive financial plan.
Here is a more detailed breakdown of some of the key differences between the two:
Services offered
Choosing a financial advisor or a financial planner will require understanding their services.
Financial advisors specialize in specific financial areas, offering services like investment management, insurance selection, and tax strategies. They focus on assisting with specific financial products or solutions.
Financial planners adopt a broader approach, including budgeting, saving, investing, retirement planning, insurance, tax, and estate planning. They create a personalized financial roadmap and guide you toward your financial goals through informed decision-making.
Tasks & responsibilities
A financial advisor's tasks revolve around managing client investments, analyzing market trends, researching suitable options, and adjusting portfolios to meet clients' financial goals.
Financial planners focus on comprehensive financial plans. Their responsibilities include reviewing budgets, setting financial goals, developing savings plans, and assisting with major life events like retirement or home purchases.
Do I need a financial planner or financial advisor?
Deciding between a financial advisor and a financial planner will depend on the following needs:
You need a financial advisor if:
You're looking for help with a specific investment strategy or decision.
You want to create a diversified investment portfolio.
You need help managing retirement accounts and other investments.
You're interested in specific financial products, like insurance or annuities.
You need a financial planner if:
You want help developing a long-term financial plan to achieve major life goals.
You're experiencing a significant life event like marriage, divorce, or the birth of a child.
You're overwhelmed by your finances and need help building a solid financial foundation.
You have complex financial needs, including tax planning or estate planning.
How to choose the best financial advisor or financial planner
To choose the best financial advisor or planner, you need to:
Define your needs: Clearly outline your financial goals and challenges.
Check credentials: Verify qualifications and experience in handling situations similar to yours.
Understand fees: Ask about the fee structure upfront and be clear on how they're compensated.
Investment philosophy: Inquire about their investment approach.
Seek recommendations: Ask for referrals and read online reviews to gauge their reputation.
Get expert financial advice
Understanding the distinctions between a financial planner and a financial advisor is vital in making informed decisions about your financial well-being.
If you’re wondering how to find a financial advisor, Unbiased will match you with a qualified financial professional suited to your needs.
Writers
Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.