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How Financial Counselors and Financial Planners Differ

Financial Counselor

If you’re in need of financial advice, there are many different routes you can go. There are not only different types of professionals you can pick from, but also firms and advisors that have very specific areas of expertise. Two of the more common options you’ll encounter are financial counselors and financial planners. They each focus on certain areas of finance, and the services you’re looking for will dictate which option you should go with. If you want to work with a financial advisor who serves your area, use SmartAsset’s free matching tool.

What Does a Financial Counselor Do?

Importantly, financial counselors tend to have in-depth knowledge of the financial difficulties that low-income households face. For example, they can help you maximize your tax refund by claiming refundable tax credits you’re eligible for. They can help you negotiate payment plans for medical bills and other forms of debt. Furthermore, they can advise you on financial products and services that are safe to use and offer low fees.

Housing counselors are a particular type of financial counselors. Housing counselors specialize in helping people find and keep affordable housing. They can help their clients avoid foreclosure or fill out applications for local affordable housing. HUD, the Department of Housing and Urban Development, certifies housing counselors who meet its standards. You can find a HUD-certified housing counselor near you online. HUD also maintains a list of HUD-approved financial counselors who specialize in foreclosure avoidance.

What Does a Financial Planner Do?

Many people turn to financial planners for help meeting big financial goals like buying a home, paying for children’s college or saving for retirement. Unlike financial counselors, who tend to be more focused on helping their clients maximize their refunds when tax time comes, financial planners often focus on minimizing their clients’ tax liability. In addition, a financial planner can help you craft a tax-advantaged retirement savings plan and help you draw down your savings in retirement in a way that minimizes your tax burden.

In addition, financial planners can offer advice on how to invest your money and which employee benefits you should take advantage of. They can let you know whether you’re on track to meet your various financial goals, or whether a change like cutting spending or increasing savings is in order. Planners can help you decide whether to rent or buy.

Financial Counselors vs. Financial Planners

Financial Counselor

The main difference between financial counselors and financial planners is the target client base they serve. Generally speaking, financial counselors tend to serve individuals with lower incomes. That’s because they often work with clients on baseline financial issues, such as getting out of debt, building up an emergency fund, creating a comprehensive and sustainable budget and more.

Financial planners, on the other hand, focus more intently on helping clients with much larger scale goals. For instance, a financial planner can help you formulate a plan for maximizing your retirement savings and income. If you have children, they can help you plan for the purchase of a home or build a college savings fund. This requires more expertise and closer client-to-advisor relationship.

When it comes to fees, financial counselors’ charges are often significantly lower than a what a financial planner would cost. This should come as no surprise, as a financial planner’s work is much more in-depth. However, there are financial planning programs available that could help you bypass planner fees altogether. If you’re not comfortable doing this on your own, though, a financial planner could be incredibly helpful.

What Are Other Types of Financial Professionals You Could Work With?

The pinnacle of the financial advice space is the financial advisor. These professionals are versed in many significant areas of finance, and they typically have the education and certifications to back it up. For instance, financial advisors can usually help with topics like retirement planning, tax planning, investment management, estate planning and more. In turn, they may hold certifications like certified financial planner (CFP) or chartered financial analyst (CFA).

Let’s say you’re wealthy or have experienced a financial windfall, and you want some help managing your money. In this case, a wealth manager might be the direction you want to go. These professionals have an even more diverse range of services that include topics typically of interest to high-net-worth individuals. These could cover real estate investing, hedge fund investing, private equity and more.

But what if you have a very specific service you’re looking for? There are also advisory professionals who stick to one area of finance. Estate planners can help you build an estate plan so your assets are taken care of after you’re gone. A chartered life underwriter (CLU) can help you select a life insurance policy and advise you on which annuities you’ll want to look into. A tax planner can help you build a comprehensive tax strategy to minimize your annual and retirement taxes.

All of this is to say that what type of advisor you should work with is largely dependent on your needs. Once you can drill down what you really want help with, your potential choices will become much clearer.

Bottom Line

Financial Counselor

Whether you opt to look for a financial counselor or a financial planner will depend on your circumstances and preferences. The line between the two fields can be blurry. However, any time you shop for a financial advisor it’s a good idea to look for someone who will have a fiduciary duty to you, who has a solid reputation and whose fees you can afford.

Financial Planning Tips

  • Financial planning on your own can be overwhelming. This is when a financial advisor can help. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • A financial plan is one of the best ways to ensure you’re able to retire when you want to and reach your other financial goals. Check out SmartAsset’s guide to building a financial plan to learn more.

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