People often use the terms financial advisor and financial planner interchangeably. However, they refer to two different types of professionals who offer distinct services. While both offer guidance on investments, taxes and other financial matters, financial advisors generally focus on managing an individual’s investment portfolios. In contrast, financial planners look at the entire financial picture and an individual’s long-term goals.
Understanding the differences between these two roles can help individuals choose the right professional to meet their unique financial needs.
Let’s explore both types to determine which one is best for you.
A financial planner
One of the primary responsibilities of a financial planner is to conduct a comprehensive analysis of a client’s current financial situation. This includes an examination of income, expenses, assets and liabilities. By gaining a holistic understanding of the client’s financial position, the planner can identify areas of improvement and develop strategies to optimise financial resources.
A financial planner serves as an educator, empowering clients with the knowledge and tools needed to make informed financial decisions.
From retirement planning to estate planning, the planner provides ongoing guidance, adapting strategies as circumstances evolve. When your financial goal is long-term, the expertise of a certified financial planner is more suitable than the skill sets offered by a financial advisor. When seeking a planner, consider their specialisation in areas such as taxes, investments, retirement or estate planning. Inquire about their designations, such as Certified Financial Planner (CFP), which reflect their commitment to excellence.
A financial advisor
Financial advisors can offer financial planning advice, however their particular expertise aligns with short-term investment advice. Their services generally facilitate the buying and selling of stocks, overseeing investments and aiding in the development of comprehensive tax or estate plans.
Crucially, a financial advisor must possess an AFS licence to serve the public, ensuring compliance with regulatory standards.
The advisor may boast other credentials tailored to the specific services they offer, further emphasising their proficiency.
Financial advisors who are also Certified Practising Accountants (CPAs), add greater benefit to the client.
Which is best for you?
When considering seeking advice from a financial planner or a financial advisor, people commonly assume they refer to the same professional. While not entirely incorrect, it’s crucial to recognise that the suitability of the individual for your specific needs may vary.
Clarity regarding the precise financial services you require plays a pivotal role in selecting the right professional to manage your finances. For instance, a banker, often considered a type of financial advisor, is someone you entrust with day-to-day financial matters.
However, relying on the same banker to adeptly handle your SMSF (Self Managed Superannuation Fund) might pose a risk.
Thinking of your financial planner as someone who is with you for the long journey ahead helps takes the guesswork out of your financial decision making. The financial planner is a relationship builder, an individual who gets to know your financial position in-depth and has a thorough understanding of what you want to achieve throughout your working life and into retirement.
A financial planner will pivot their advice based on your life circumstances. They educate you in good financial management, help create realistic financial budgets and work across multiple streams including superannuation, SMSF, personal finances, retirement planning, investments and property investments. While both have a role to play in your financial diversity, for long-term strategic financial growth and management, having a qualified financial planner by your side makes sense.
The Step Up Financial team provides clients with realistic and achievable financial plans. We help everyday Australians Step Up and achieve financial freedom. We enable individuals to grow their wealth through professional financial planning advice and proven long-term wealth strategies that create financial independence.
Contact us today for experienced, compassionate and professional financial planning advice.