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News Room

Should You Deal With A Financial Advisor Or A Financial Planner?

Melissa Cohen
2017-03-22
How do you know if a financial advisor or financial planner is right for you, and how do you make sure you get what you want from each?
You may be thinking this is another case of a ‘tomayto, tomahto’ post and you could be right, we think. As Investopedia put it: Every financial planner is also a type of financial advisor. But every financial advisor is not necessarily a financial planner. Right.

What’s The Difference Between A Financial Planner And A Financial Adviser?

Both of these professions are quite broad. And there seems to be more similarities than differences.

How Will a Financial Advisor Help Me?

A financial advisor is a general term for any professional who helps you manage your money. Broad, yes. We told you. There are a number of specific areas of money management and they can cover either some, or all of these areas. There’s a lot of grey area and confusion between what a financial advisor means here.  Perhaps not as much as in the US where advisors are solely investment focused and planners take the holistic approach. This is not the case in South Africa. Financial advisors can help manage investments, act as intermediaries when buying and selling stocks and funds, or as an insurance agent, etc. They can create holistic financial plans to cover your insurance needs, your estate, and your tax plan. Whatever a planner can do... The advisor assesses your current circumstances and identifies areas where you and your family’s financial well-being may be at risk. E.g. the lack of a will, or a shortfall on your retirement savings. There are a lot of sub-categories in this profession. Depending on what they’re covering, it’s important that you make sure your financial advisor is duly accredited.
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So What About A Financial Planner?

A financial planner is in fact, a type of financial advisor (one of those subcategories). But the financial advisor, in theory, brokers the sale of certain products. These products safeguard the client against death, disability, or not providing adequately for major life events like retirement. The financial planner, on the other hand, helps individuals (and companies) create a plan to meet long-term financial goals. More of a programme, actually. Once again, there’s a lot of grey area as financial advisors also administers a plan or strategy for reaching the client’s goals. In the US, financial planners fulfil the roles commonly associated with a financial advisor in South Africa. These include estate planing, insurance, retirement planning, investments, etc. The financial planner also assesses your current circumstances and then looks at your goals.
As Suze Orman – America’s famous financial planner – says, "A good financial planner is more focused on the plan than the products".
A financial planner, then, should perhaps differentiate by fulfilling more of a financial coaching role than most traditional financial advisors, but that is at the planner's discretion.
Read More about How Much Owning a Car is Really Costing You

The Bottom Line

The lines have blurred. Traditionally, you would go to a financial advisor to help you grow money, and a financial planner to look at your complete financial life. But a financial advisor does both of these things, and, provided a financial planner is accredited to give investment advice, vice versa. Don’t limit the services that are available to you to titles. If you require something straight up, i.e. a quick assessment on your retirement shortfall and recommendations, speak to a financial advisor. If you want a coaching aspect to your plan, ask your advisor if this is in his repertoire. Alternatively, contact a financial planner and find out if they can help you in this way. That includes identifying bad spending habits, assessing your circumstances and goals, and suggesting changes that could be made and monitored along the way. Whichever way you go, just do your due diligence as the consumer and make sure you ask your financial planner/advisor all the right questions and know what to expect and how you’re going to be charged.
But the very bottom line is, as Phil Knight - co-founder of Nike – said; “It is hard enough out there. Get all the help you can. Getting help really is just a part of that lifelong search for wisdom.”
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