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The terms “financial advisor” and “financial planner” are often used interchangeably in the world of personal finance. But while both professional titles involve someone who guides your financial decisions, there is a slight difference between the two. Knowing this contrast can help you make better choices about who to hire in certain circumstances.
In short, a financial advisor tends to help clients with more specific, immediate financial matters. They may specialize in retirement, investments, taxes or estate planning. A financial planner, on the other hand, can be more simply defined as a person who provides clients with lifelong financial planning and helps them see the bigger picture of their finances as a whole.
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What to look for in a financial advisor and planner
Although there is a slight difference between the goals of a financial advisor and the goals of a financial planner, they share similarities when it comes to what to look for when hiring. The main thing to keep in mind is the credentials of your potential advisor or planner.
Since virtually anyone can claim to be a financial advisor or planner, financial services industry experts urge consumers to look for those with official designations and avoid unqualified ones. Having an official designation means that a person has passed certain exams or has completed certain education and work experience thresholds. A counselor or planner who does not have these credentials may therefore have skipped exams and training.
The process of finding someone with the right financial license is similar to finding someone to help you when you’re sick and need help with your body, says Skip Schweiss, past president of the Financial Planning Association.® (FPA®), a membership organization for certified financial planners. Schweiss urges people to find the “most qualified” counselors and planners, just as they would seek out a “top doctor.” He adds that “consumers need to know if they are getting the right financial planner.”
Accreditations to look out for
So how do you know if a financial advisor or planner is “real?” A credential holder may hold several licenses and designations, the most common being Certified Financial Planner™ (CFP®). “A lot of people see the CFP as the gold standard,” says Schweiss. “Many advisers say it gives them more credibility with clients.”
Other licenses to look out for include Chartered Financial Analyst (CFA®), Chartered Financial Advisor® (ChFC®) and Chartered Investment Management Analyst® (CIMA®). Stephanie Mackara, chief wealth advisor at Charleston Investment Advisors, would add a registered investment advisor (RIA) to this list, as they are required to provide advice to investors that is “uniquely aligned with the investor’s financial goals and needs,” Mackara says.
Tips for finding an accredited financial advisor or planner
There are a number of free resources online to verify professional financial qualifications, experience, education, and discipline history. Here are a few:
There are also tools that do the homework for you. For example, Zoe Financial matches clients with pre-screened financial advisors with CFP, CFA or CPA (Certified Public Accountant) designations. Its advisers typically charge an annual rate of between 0.5% and 1.5% of client assets under management.
If you’re interested in finding an hourly advisor, Garrett Planning Network finds you financial advisors and planners in your zip code who charge by the hour.
Keep in mind that the prices for hiring financial advisors or planners vary depending on a number of factors, including the form of compensation and whether they will offer their services on an ongoing basis.
If you’re not ready to pay for a financial planner or advisor yet, but want to start getting your finances in order, you might consider using low-cost or free tools like a robo-advisor, which creates and manages a customized investment portfolio based on your goals and tolerance for risk. risk, or a budgeting app, which tracks your income and spending and can help you create a budget. Choose ranked Betterment as the best robo-advisor and Mint as the best free budgeting app.
On Betterment’s secure site
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For better digital investment, minimum amount of $0; Premium investment requires a minimum balance of $100,000
Fees may vary depending on the chosen investment vehicle. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has a 0.40% annual fee
Up to one year of free management services with a qualifying deposit within 45 days of registration. Valid only for new individual investment accounts with Betterment LLC
Stocks, bonds, ETFs and cash
Betterment RetireGuide™ helps users plan for retirement
Information on Mint was independently collected by Select and was not reviewed or submitted by Mint prior to publication.
Shows income, expenses, savings goals, credit score, investments, net worth
It categorizes your expenses
Yes, but users can change
Yes, bank and credit cards
Available in both the App Store (for iOS) and Google Play (for Android)
Verisign scanning, multi-factor authentication and Touch ID mobile access
Editorial Note: The opinions, analyses, reviews or recommendations expressed in this article are solely those of the Select editor and have not been reviewed, approved or otherwise approved by any third party.