Financial Planner vs. Financial Advisor

When comparing the roles of a financial advisor vs. financial planner, the distinction can be confusing. Since both types of professionals provide financial guidance to clients, the terms are often used interchangeably. While the term “financial advisor” often applies to a wide range of professionals who deliver financial services to clients, financial planners are a specific type of advisor that creates comprehensive plans that address a variety of financial needs and goals that a client may have. Understanding these differences can help individuals decide which type of professional aligns better with their needs.

If you are looking for financial advice, SmartAsset’s free matching tool can help you find a financial advisor who serves your area.

What Is a Financial Advisor?

A financial advisor has typically referred to anyone who helps clients manage their money. However, the term is most commonly associated with investment professionals who offer portfolio management and investment advice.

Advisors may cater to certain income levels. Ultra-high-net-worth individuals may want to consider working with a private wealth manager, while someone struggling to get out of debt may prefer the help of a financial counselor. Financial advisors and planners may hold different certifications and licenses, but it’s not a uniform requirement. Instead, the type of activities an advisor performs dictates what type of licenses or credentials they need.

Financial advisors who help manage investments or buy and sell stocks typically must hold a Series 65 securities license. Advisors who specialize in other areas of finance may pursue specific credentials to deepen their knowledge and signal their level of expertise to potential clients. For example, advisors with expertise in tax are often certified public accountants (CPAs), while those with a particular focus on investment analysis may hold the chartered financial analyst (CFA) designation.

Who Can Call Themselves a Financial Advisor?

The term “financial advisor” is relatively broad and doesn’t require a specific certification, meaning almost anyone has historically been able to use the title. However, recent changes under Regulation Best Interest (Reg BI) aim to bring more clarity and accountability to whom can call themselves “advisors” or “advisers.” Introduced by the SEC in 2019, Reg BI mandates that broker-dealers and their representatives who provide financial advice must act in the best interests of their clients, avoiding conflicts of interest where possible.

According to the SEC, the use of terms like “adviser” or “advisor” is presumed to be a violation of Reg BI’s capacity disclosure requirements if used by:

A broker-dealer that is not also registered as an investment advisor
An associated person who is not also a supervised person of an investment advisor

This means that individuals using these titles must be appropriately registered and supervised to ensure compliance. Reg BI imposes a standard of conduct that requires those who call themselves “advisors” to adhere to stricter ethical guidelines, prioritizing transparency and aligning their recommendations with the financial needs of their clients.

What Is a Financial Planner?

Like a financial counselor or a private wealth manager, a financial planner is a specific type of financial advisor. A financial planner typically specializes in creating comprehensive plans to help clients achieve their short- and long-term goals. In many cases, they also help manage investments, but that doesn’t have to be the case. In reality, it varies from planner to planner.

Like a financial advisor, a financial planner will assess your current situation and make recommendations on what you can do to improve it. A financial planner may also have certain areas of expertise, such as retirement planning or education planning.

Advisors who provide financial planning are often either Certified Financial Planners™ (CFPs®) or chartered financial consultants (ChFC). These financial certifications can help prove that the advisor has the requisite education and experience in financial planning.

Costs of Financial Planners vs. Financial Advisors

A financial advisor explaining the costs of her services to a client.

Before hiring a financial planner or financial advisor, make sure you understand what you’re paying for. It can be challenging to figure out what advice you need, but it can be even tougher to know if you are getting it at a fair price.

Unfortunately, there’s no one-size-fits-all cost for financial advisors or financial planners. The cost will depend on a few factors, like how the individual advisor or planner is compensated and whether they will provide their advisory service on an ongoing basis. Because of that, we can’t generalize that one will be more expensive than the other.

Advisors are generally compensated in one of three ways: fee-only, fee-based or by commission. Fee-only advisors only make money based on the services they provide to clients.

Advisors paid by commission earn money based on the specific financial services or products they sell, usually through another company. Fee-based advisors charge an upfront fee for their services and also earn a commission for any financial products they sell. If you want to avoid the constant sales pitches and the potential for conflicts of interest, you should choose a fee-only professional.

Many planners and advisors that provide ongoing service charge a percentage of the assets under their management. Some advisors may also charge a flat rate or hourly fee. According to a study by Advisory HQ (updated in 2023), financial advisors and planners charge, on average, between $7,500 and $55,000 for a full financial plan, $120 to $300 by the hour or 0.59% to 1.18% of assets for ongoing investment management.

A Kitces survey of almost 800 financial advisors found that 62% of advisors who offer financial planning incorporate these costs as part of the AUM fee they charge. Only 27% of advisors reported charging separately for creating a financial plan.

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

Financial advisors and financial planners both provide financial guidance, but their approaches reflect unique themes investment management and wealth-building versus long-term financial strategy.

Investment vs. planning focus: Financial advisors are investment-focused, helping clients build wealth and manage risk. They concentrate on portfolio growth, asset allocation, and maximizing returns. In contrast, financial planners focus on long-term strategies, guiding clients toward specific financial goals like retirement, education funding, or debt reduction.
Services provided: Financial advisors offer a broad range of services related to investment management, retirement planning, and tax strategies. They may hold licenses to buy and sell financial products, which allows them to actively manage client portfolios. Financial planners, however, emphasize budgeting, debt management, and creating a roadmap for financial security, often taking a holistic view of a client’s finances rather than focusing on specific investment products or strategies.
Professional credentials: While financial advisors may hold various licenses required for selling investments, financial planners are often CFP® professionals, indicating specialized training in comprehensive planning. The CFP® designation emphasizes expertise in areas such as savings plans, risk management, and goal-based financial planning.
Client goals and approach: Advisors typically aim to grow client wealth through investments aligned with risk tolerance and market opportunities. Planners, on the other hand, work toward achieving personal life goals by creating actionable plans, which may include investment solutions, insurance products, tax planning and estate planning, among other services.

Pros and Cons of Hiring: Financial Advisor vs. Financial Planner

When deciding between a financial advisor or a financial planner, comparing a list of benefits and drawbacks for working with either professional could help you clarify what type of services you need.

When working with a financial advisor, common benefits could include:

Investment management: Financial advisors typically have deep expertise in managing investments, helping clients select appropriate securities, and optimizing portfolios for growth and risk management.
Active portfolio monitoring: Advisors actively track market conditions, providing adjustments and recommendations that reflect changing economic and financial trends.
Specialized knowledge: Advisors often hold credentials like CFA, which reflect strong analytical skills and in-depth financial market knowledge.

Some drawbacks, specially when compared with a financial planner, can include:

Limited planning scope: Financial advisors primarily emphasize investment performance, which might not cover broader planning needs such as budgeting, debt management, or comprehensive retirement planning.
Potential conflicts of interest: Advisors who earn commissions may recommend financial products that benefit them financially, creating possible conflicts of interest.

Working with a financial planner, on the other hand, could offer you these general benefits:

Comprehensive planning: Financial planners take a holistic approach, addressing budgeting, retirement, education, taxes, estate planning and insurance, which can offer clients a clear roadmap toward achieving long-term goals.
Customized strategies: Planners create highly personalized financial strategies aligned specifically to a client’s individual life goals, priorities and timelines.
Reduced conflicts (fee-only): Many planners, especially CFP® professionals, operate on a fee-only model, helping clients avoid sales pressures and conflicts of interest.

But, this financial professional can also have some limitations, especially when compared with financial advisors:

Less focused on active investing: Financial planners may have less emphasis or experience in detailed investment management compared to financial advisors specializing in portfolio growth and analysis.
Higher initial costs: Comprehensive financial plans often involve higher upfront fees, particularly for detailed, customized plans or ongoing services beyond investment management.

Keeping these pros and cons in mind, you may want to work with a financial advisor when your priority is active investment management and maximizing portfolio returns. A financial planner, by comparison, could be a better fit if you’re seeking comprehensive guidance on budgeting, retirement, taxes and long-term financial goals.

Bottom Line

An advisor reviewing a financial plan with a client.

Once you’ve made the financial planner vs. financial advisor decision, you’re ready to start searching. Narrow down your options to a few good candidates, develop a list of questions to ask them and then schedule meetings. Ask about their training, qualifications, typical clients, fee structure, investing approach and the services they can provide. Check their disciplinary record and references to make sure they’re in good standing. An advisor should be capable, affordable, transparent and compatible.

Tips for Choosing a Financial Advisor

A financial advisor can often help you with a number of services you need from building a long-term financial plan to managing your investment portfolio. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Look carefully at the fees that the financial advisor you’re looking at charges. Each advisor has a different fee schedule for their services. For instance, fee-only financial advisors only earn money from the fees they charge clients for their advisory services. Fee-based advisors, on the other hand, can also earn commissions from selling products, like insurance policies.
Financial advisors often have advisory certifications, which can give you an idea of the subject matter they’re most proficient in. As mentioned above, financial planners often hold certified financial planners (CFP) or chartered financial consultant (ChFC) designations. Advisors can also specialize in areas like divorce planning, estate planning or retirement planning, while others have expertise in investment management or tax planning.

Next Steps

Do you want to learn more about financial advisors? Check out these articles: