Financial Advisor vs Financial Planner: What is the Difference?

The terms financial planner and financial advisor are thrown around synonymously in the common parlance. However, although they share some similarities, they are different. If you’re planning to make a career in the finance industry, it is important to understand the distinction between them in terms of qualifications, roles and responsibilities, and the people they cater to. Similarly, if you’re looking to approach any of them for your financial needs, it’s better to have a fair idea of the differences between them.

So, without any further ado, let’s dive straight into the blog.

Who Is a Financial Advisor?

Financial advisors are professionals who help people manage their finances. Since they’re professionals, they have certain knowledge and expertise in their domain and thus their recommendations are considered trustworthy. The people they render their services to are ultra-high net or high-net individuals, businesses, etc.

To help you accomplish your financial goals, they will undertake a bunch of roles and responsibilities as follows:

1. Financial Planning: By assessing the financial position of their clients, financial advisors create short-term and long-term goals as well as a roadmap to achieve them.
2. Retirement Planning: Nobody wants their post-retirement life to be spent in a constant worry of making ends meet. To ensure that their clients have a financially secure life post-retirement, financial advisors can advise on the best investments they can make today such as buying premium healthcare insurance, opening a recurrent account with good interest, investing in stocks of a company and so on.
3. Tax Planning: Efficient tax planning is the key to efficient wealth planning. Investing in the right assets and claiming tax deductions can help you in the long run. A good financial advisor employs a long-term tax saving strategy that helps you save taxes and also keeps your wealth growing.
4. Estate Planning: If a client wants to pass on their estate to family, or relatives, or offer it as a charity to NGOs or religious institutions, a financial advisor can help you understand the concept of gift deed, will and other such components of estate planning.
5. Debt Management: Managing their client’s debts, streamlining the repayment process and avoiding future loans also fall under the various responsibilities of a financial advisor.

Who Is a Financial Planner?

Financial planners are those individuals who are skilled in helping you create a financial blueprint, financial planning that includes debt management, asset allocation, insurance planning, estate planning, goal-based financial planning, etc. They are professionals who may work either independently or be associated with wealth management firms, banks, insurance companies, or even non-profit organisations.

The roles and responsibilities of financial planners are briefly discussed below:

1. Realistic goal setting: Based on your income, financial planners can help you set and achieve your financial goals such as buying your dream house, car, sending your child abroad for education, retiring comfortably, etc. They emphasise on the concept of goal based financial planning.
2. Budgeting: Strategies that streamline debt repayment and cut down on unnecessary expenses are also created by financial planners.
3. Saving, Investment and Retirement Planning: Financial planners can help their clients develop mindful spending habits, save money and channelise them into investments that bring maximum profit and minimise risks. They can also help you with retirement planning and estate transfers.

As you might have understood, both financial planners and advisors have a lot in common. But, now, let’s discuss the elephant in the room,

Financial Advisor vs Financial Planner – 4 Key Differences

• Educational Qualifications

A financial advisor may hold a range of certifications including but not limited to CFP and CFA.

On the other hand, a financial planner must mandatorily have a CFP certification.

What’s the difference between CFP and CFA?

Here’s a brief analysis:

Certified Financial Planner (CFP) is a certificate awarded by the Financial Planning Standard Board (FPSB), the official partner of CFB Boards of Standards, USA. It is a globally recognised certification with a rigorous testing procedure.

Certified Financial Analyst (CFA) is another prestigious certificate awarded by the CFA Institute, US. The CFA charter is considered the gold standard in the finance and investment industry. Financial advisors with CFA are more likely to get better employment and promotion prospects.

Also Read – 5 Benefits of CFP course that make it worth your time & investment

• Client Relationship

One of the major differences between a financial planner and an advisor is their relationship with clients. A financial advisor may simply work as a consultant. They’ll inform you about the best saving and investment strategies and then you’re on your own. Whereas, financial planners wear the dual hats of strategists as well as executioners. Once you empower them, they can also conduct transactions in the market on your behalf.

Now, here’s an important thing to note, while executing business, financial planners must fulfil their fiduciary duty, that is, keeping their client’s interests over and above theirs.

• Compensation

Financial advisors may charge fees based on the assets under their management (AUM), hourly rates, or commissions from selling financial products.

On the other hand, financial planners typically charge flat fees (i.e. a predetermined percentage for managing the client’s investment portfolio), hourly rates, or project-based fees, with a focus on transparency.

• Services Offered

Financial Advisors, as we have seen earlier, offer a broad range of services, including investment management, tax planning, and wealth preservation. They engage in the day-to-day management of investment portfolios of businesses and high-net-worth individuals.

Financial planners, on the other hand, specialise in creating detailed financial plans to help clients achieve specific goals like retirement, education funding, or debt reduction. They always eye on long-term financial planning as opposed to day-to-day management activities.

Also Read – Here’s What CFP’s Earn In India In Different Job Roles

How Can IMS ProSchool Help You Become a Financial Planner?

If you’re planning to become a financial planner, we’ve got you covered.

IMS Proschool offers a comprehensive CFP course that covers the syllabus for clearing the exams, offers a dynamic learning experience, and 100% placement support. The best part is that you don’t need any fancy qualifications or finance industry experience before taking the CFP course in India. All you need is a minimum of 55% marks in your 12th standard examinations, an ardent interest in the field and a curiosity to learn!

Check out the CFP course at IMS Proschool NOW to unlock your career as a financial advisor in India and abroad!

Conclusion

To sum up, if you need investment and wealth management services, financial advisors are your best bet. On the other hand, financial planners are the best choice if you need a professional to create a holistic financial plan for your future financial needs.

FAQs

How long does it take to complete the CFP course?

The average course duration of a CFP course is 6-18 months.

What is the cost of becoming a CFP in India?

There are several moving parts that must be brought into alignment to offer you a mean figure. For instance, keeping in mind the CFP registration fees, course fees, examination fees, and certification fees, you can safely expect to spend around 1.5-2 lakhs to earn a CFP Certification in India.