The difference between a Financial Planner and a Financial Advisor is that a Financial Planner focuses on creating a plan to help you meet your financial goals, whilst a Financial Advisor has more broad responsibilities and helps manage your money including investments and pensions.
It’s important to know the difference so that you can find the right professional to help you with your finances. We are often asked the difference and see them mistakenly used interchangeably, which confuses a search process which can already be daunting enough. In short a Financial Planner is a type of Financial Advisor; that is a Financial Advisor that offers a Financial Planning Service, either by specialising in just financial planning or sometimes along side other complimentary services, such as investment or pension advice.
Hopefully this article will help you to better understand the difference and find the right Financial Adviser or Planner for your situation.
A Financial Advisor is an all-encompassing term for an advisor who offers assistance with, or sometimes complete management of, your finances. A Financial Advisor can specialise in certain activities such as Investment Advice or Financial Planning or may offer a range of services, as many have an amount of overlap.
A Financial Advisor may help you with a specific question or problem (such as transferring a pension or starting an investment account) or may help you with a more complex situation (such as developing a plan to pay for school fees or working out how much you need to save each month for your ideal retirement). Good advisors will always take into account your goals and what else is happening in your life, to make sure you get the most suitable advice for your situation.
As well as giving advice on your finances a Financial Advisor can assist you in setting up financial products (such as a new ISA) help manage them (transferring a pension pot) or switch the platform they are all kept on.
In the UK Financial Advisors are a regulated profession and anyone holding themselves out to be a Financial Advisor and giving advice must be correctly trained and regulated. You can check if an advisor is properly authorised on the Financial Conduct Authority Register.
Its can be difficult to be sure you’re going to get the best outcome if you haven’t dealt with a financial professional before. Please see our article on what is a financial advisor for more details on what a Financial Advisor does or give us a ring for a no obligation chat around your situation.
Financial Planning is one of the main disciplines of financial advice. It is a holistic service that uses forecasting and planning to improve someone’s overall financial situation to help meet their current financial needs and long-term goals.
Our modern-day financial lives are complex and inter-connected. Pulling one handle can impact and have unintended consequences in another part of your life. A Financial Planner will help understand how your life and your finances are arranged and use this to help better organise and plan your finances. This usually involves assessing your current financial situation, working to understand what you want your money to do (both now and in the future) and help to create a plan to get you there. Financial Planners can help you reach a range of goals including, reduce spending, pay off debt, save and invest for the future. A Financial Planner can be especially helpful when you’re faced with a life change — think marriage, a divorce or an inheritance.
This type of adviser is generally more involved, they get to know their clients well and then create a plan through recommendations and then continually monitor that plan to ensure that it stays on track.
The financial planning process has a lot of overlap with other areas of financial advice, for example, a financial plan might involve investing part of your wealth into the stock market or setting up a pension, so it should not be seen as a completely different discipline, more one that is delivered in a certain way which is more appropriate for certain client situations that need a more thorough and in-depth solution.
IFA stands for Independent Financial Adviser.
In the UK Financial Advisers can either be Restricted or Independent; and so Financial Planners, being a type of Financial Advisor, can also be Independent or Restricted. Only an Independent advisor can call themselves an IFA.
An Independent adviser is free to choose from the whole of the market when choosing a financial product for their client. This allows the adviser to look across the tens of thousands of funds, pension products, bonds etc. Each client has a unique situation that will likely require a particular mix of different types of products. The more choice that is available then the better chance of finding the most suitable financial product for the client.
All advisors should tell you clearly if they are Independent or Restricted and what that means. If they are Restricted then they should tell you clearly what they are limited to provide and how that will impact the advice you will receive.
There is no automatic difference in the prices of a Financial Planner and Advisor. There are many factors affecting how much an advisor charges for each piece of work, from the complexity of the situation to the amount of research required, to any additional fees for undertaking ancillary activities such as setting up trusts.
Financial planning tends to be a more comprehensive service than some of the more straightforward problems an advisor may face, which could be as simple as “how do I sell a share”, and as such average prices may tend to appear higher than others. But this is down to the nature of the work they accept rather than how much they charge for a certain amount of work.
In short there should be no difference in prices based purely on the title that the adviser uses and it is the type and quality of the work they will do for you that is the most important. A good advisor should be upfront with their fees and charging structure, and be happy to explain what you are getting for your money.
As we’ve seen a Financial Planner is a type of Financial Advisor, who has focused on one aspect of financial advice. There is no clear evidence that someone who is solely a Financial Planner will be better than an Advisor who offers other services.
If you believe you need a comprehensive financial plan then approaching a Financial Advisor that offers a financial planning service would be a good place to start.
A decision on which advisor to choose can be difficult but it is ultimately a personal one, as much relies on trust. Talking your situation through with a potential adviser is a sensible first step to see what they can offer, how much they may change and to get a feel for how well you will work together.
It can be difficult to work out which finance professional is right for you and your situation. Hopefully this article has helped make any future search a bit clearer by explaining what a Financial Planner and a Financial Adviser are, and explaining that a Financial Planner is a type of Financial Adviser who only focus’ on offering a financial planning service.
There are a lot of considerations on which finance professional to choose, but how they describe themselves isn’t likely to be the most important. Talking to a potential adviser and seeing how clearly they can explain the benefits and service they offer along with the likely costs is a good way of getting an idea if an adviser is right for you. This is why we offer an extensive free consultation to discuss your situation to both see what we can offer you and also for you to get an idea if you can trust us with your financial future.