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Both financial lawyers and financial advisors help protect your finances, but they serve different purposes. A financial lawyer handles legal matters like estate planning, contracts and disputes. Meanwhile, a financial advisor focuses on money management, investments and long-term strategies. The right one for you depends on whether you need legal help, financial planning or both. Together, they provide support for complex financial situations.
Use our free matching tool to connect with fiduciary advisors who serve your area.
What Does a Financial Advisor Do?
A financial advisor offers wealth management and financial planning advice.
They cover several areas of finance, including these.
- Investments
- Retirement plans
- Insurance
- Estate planning
- Saving for college
There are many types of financial advisors, each with different certifications, licenses and expertise. Some financial planners specialize in certain products or types of clients.
It is important to find an advisor whose expertise and skills match your financial goals and needs. There are several services that financial advisors may offer.
- Portfolio reviews
- Individual retirement planning
- College savings strategies
- Insurance policy reviews
- Estate planning
- Tax strategies
- Business retirement plans
What Does a Lawyer Do?
Lawyers advise clients in legal matters, draft documents and represent them in courts to protect their interests.
The lawyer and their legal team represent them when suing a person or business or defending their client in civil or criminal court. They file the appropriate paperwork with the court and advise their clients on the best courses of action. They then search for evidence to protect their clients and research case law to substantiate their arguments.
While some people think lawyers focus solely on court cases, their expertise goes beyond that part of the profession. Attorneys provide several services.
- Review or draft contracts
- Create wills and living trusts
- Prepare paperwork for real estate transactions
- Craft partnership agreements
- Mediate disputes
- Negotiate agreement terms
- Send demand letters
Lawyer vs. Financial Advisor: Key Differences
The primary difference between financial lawyers and financial advisors lies in their areas of expertise, qualifications and core responsibilities. While both may overlap in areas, such as estate planning or tax strategies, their training and objectives differ.
Expertise
- Lawyers focus on legal matters, ensuring compliance with laws and regulations.
- Financial advisors focus on building and managing wealth.
Qualifications
- Lawyers typically hold a Juris Doctor (JD) degree and must pass the bar exam in their state.
- Financial advisors, on the other hand, often hold certifications, such as Certified Financial Planner™ (CFP®) or Chartered Financial Analyst (CFA). These credentials reflect their knowledge in financial planning and investments rather than legal matters.
Core Responsibilities
- Lawyers work to resolve legal disputes or ensure compliance with laws, often focusing on protecting assets through legal structures.
- Financial advisors, by contrast, help clients optimize their finances. They focus on strategies to build wealth and meet future goals.
Lawyer vs. Financial Advisor: Which Do You Need?
A financial lawyer is often the appropriate professional to hire for legal disputes and legally binding documents.
They ensure that all legal formalities are met, minimizing the risk of disputes down the road.
When faced with lawsuits or a required court appearance, only a lawyer can provide representation. They can advocate on your behalf and handle negotiations while guiding you through the complexities of legal proceedings.
A financial advisor can be very beneficial for several goals, such as building a financial plan and planning for retirement. They can help create a tailored strategy that aligns with your income, financial goals and risk tolerance.
Although not a replacement for tax professionals, many financial advisors are skilled in recommending tax-efficient strategies to maximize wealth. They can guide you in charitable giving, estate planning and long-term investment growth.
How Lawyer and Advisor Fee Structures Compare
Lawyers and financial advisors charge for their services in different ways. Understanding the typical range for each helps you evaluate whether a specific quote makes sense.
Lawyer Fee Structure
Lawyers commonly bill by the hour, with rates that vary significantly by location, experience and area of practice.
However, estate planning attorneys often charge a flat fee for standard documents, such as drafting a will or a basic trust. This gives clients more cost certainty than an hourly arrangement.
More complex legal work, including litigation or business transactions, is more likely to be billed hourly or through a retainer, an upfront amount that the attorney draws down as work is completed.
Financial Advisor Fee Structure
Financial advisors typically charge in one of a few ways:
- Percentage of assets under management. A common structure is a percentage of assets under management (AUM), often around 1% annually. This means the fee scales with the size of the managed portfolio.
- Flat fee. Other advisors charge a flat fee for a comprehensive financial plan. It is usually an hourly rate for specific consultations or a combination of methods depending on the services provided.
- Fee-only advisors. Fee-only advisors are compensated solely by their clients and do not earn commissions on products they recommend
- Commission-based. Commission-based advisors may earn money from the financial products they sell.
These fee models are not always directly comparable. A lawyer’s fee usually reflects a defined task with a clear endpoint, such as drafting a will.
Meanwhile, an advisor’s fee often reflects an ongoing relationship that continues for years. A $1,500 flat fee for a will is a one-time cost, while a 1% advisory fee on a $500,000 portfolio recurs annually and compounds over time, increasing the total cost over a long client relationship.
Asking each professional to clarify not just their rate but also what is specifically included in that rate provides a clearer picture of the total cost before committing to either. Be sure to ask whether any additional costs might apply.
Questions to Ask Before Hiring a Lawyer or Advisor
Before you choose a financial advisor or lawyer, it’s important to do your due diligence and ask targeted questions to clarify services and fees.
- What is your experience with cases similar to mine?
- Are you familiar with the laws in my state or jurisdiction?
- What are your fees, and how are they structured?
Likewise, as you interview financial advisor candidates, ask the following questions.
- What certifications do you hold, and what services do you provide?
- What is your compensation? Fee-only, commission-based or a combination?
- Can you provide examples of how you’ve helped clients achieve similar financial goals?
Can You Benefit from Both Professionals?
One area where lawyers and financial advisors frequently collaborate is in their estate planning services.
While an estate planning lawyer drafts legal documents, such as wills and trusts, a financial advisor ensures your assets are allocated effectively to meet your financial goals. Working together, they provide a comprehensive approach to wealth management and legacy planning.
For business owners or high-net-worth individuals with significant assets, both professionals may be necessary. A lawyer can handle legal contracts, intellectual property and compliance issues, while a financial advisor can manage assets and investments, succession planning and cash flow strategies.
Bottom Line
Although lawyers and financial advisors serve different functions, it’s not uncommon to need both professionals when creating a complete financial plan. A financial planner specializes in wealth management and financial planning, while an attorney creates legal documents and provides advice based on current laws. For investors, the best approach is to create a team of advisors that will protect your assets and position you for future wealth.
Tips for Protecting Your Assets
- Financial advisors and attorneys offer services and products to protect your assets. One of the easiest ways to protect your assets is by buying life insurance. It is an affordable option that provides money to your heirs to replace your income and ensure that they are taken care of. Our life insurance calculator estimates how much life insurance you need based on your answers to a few quick questions.
- If you want to protect your assets, you can build a team of professionals that offer guidance and advice when you need it most. 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.
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