I got a call from a Fidelity rep recently. He explained that my old financial advisor left the firm and he wanted to introduce himself, just in case I needed assistance. It’s too bad we never know when our contact leaves before the split happens, but at least they called me to let me know there will be a change.
On the call, he mentioned how he’s a financial planner. But he kept referring to the person he replaced as a financial advisor. I asked him why he chose to use a different title to refer to his predecessor. He explained that it was because he went through the pain to obtain a Certified Financial Planner (CFP) certification.
I didn’t press further, but I did look it up afterward. What does it mean to be an financial advisor? What does it mean when someone calls themselves a financial planner? Are they different? Here’s what I found out.
Advisor vs. Planner
A financial advisor is usually someone who manages your money in some way.
The whole financial industry uses this designation loosely, though. A financial advisor can be managing your investments, estate planning, or even your taxes. There are financial advisors who specializes in insurance or helping get out of debt.
Some financial advisors you encounter might even just be sales people, selling financial products. Sure, they have a good understanding of what they are selling, but they are far better at relationships than technical knowledge of the financial products they pitch.
A financial planner is actually one specific type of financial advisor. As the name implies, a planner is someone who looks at your financial picture, discusses your goals, and is able to help you come up with a plan to get there. They are trained to come up with a comprehensive plan that can ultimately help you reach your long-term financial goals. We talk about financial planning often here at WalletGenius, for anyone who’s interested in a DIY approach. But if you want professional help, then you should seek out a financial planners.
So How Do I Find a Planner?
The designations are all used pretty loosely in the industry. Among advisors, you will also have people call themselves Financial Consultants or Financial Counselors. What you really want to look for are the certificates and licenses they have. If planning is what you seek, you will want to find those who are Certified Financial Planners (CFP) or Chartered Financial Consultant (ChFC).
CFPs, for instance, need to work in the financial industry for a few years before they can even consider taking the certification exam. This means that every CFP you meet will have both job experience, as well as knowledge on the theories of financial planning.
CFP or ChFP?
ChFC, on the other hand, covers the same curriculum covered by the CFP — plus two more on advanced financial planning topics. At first glance, this seems more comprehensive. However, you just need to complete the required course work to get the ChFC designation. On the other hand, CFPs have to pass the CFP exam that’s universally recognized as a test you can’t just fluke your way through. Additionally, ChFC doesn’t have the real life work experience requirement.
With either designations, you’d be happy to know that CFPs and ChFCs have a fiduciary duty to their clients. This means that they are obligated to act in the best interest of the client, as opposed to just acting out of self-gain. Have you heard of horror stories where some financial advisor sold some complex financial product to someone just to enrich themselves? Working with the CFP or ChFC drastically cuts down on the chances of that happening to you.
Where You Find a Financial Planner is Important
My fidelity rep is a Certified Financial Planner. However, I will never expect him to do a comprehensive job in helping me plan for the future. If I really want someone to come up with a solid plan for me, I would look elsewhere. This is because of how the relationship is set up.
First of all, Fidelity is one of many brokerage firms in the industry. They are not the only place where I keep my assets. There’s a very strong desire for my rep to steer me towards funneling my assets into the Fidelity accounts. While this technically may not change my financial picture, and thus skirt around the fiduciary duty requirement, it’s a distraction that could cause unnecessary logistic work.
Find Your “Money Guy (or Girl)”
What’s far more important, though, is that these professionals change jobs often. My old rep already left. What if this new rep leaves soon too? Or if the next rep isn’t even a CFP? Even if the new rep can also help me plan, financial planning is a dynamic process that changes as your life evolves. In order for someone to do a really good job (and maintain a solid financial plan that can grow with you) they need to know your situation very well. This means taking the time to know you and your family. If they are able to anticipate what’s ahead for your life, then it’ll make your plan that much better.
The problem is that “getting to know you” is a process that takes time. In reality, a financial planner may be able to make a decent plan for you after one meeting. However, there will be plenty of room for improvement. That’s why an independent planner — who’s in it for the long haul — is my recommendation if you’re looking for a serious financial plan. You might hear your friends or family members saying they have a “money guy.” That’s different from simply using a brokerage company. The “money guy” is someone you can continue to use, regardless of which company they may be affiliated with over the years.
The good news is that when you do find a good professional, seeing them regularly and giving updates on your life will only help. Your planner will be able to refine the plan you have already established together.
The Bottom Line
When you seek out a financial professional, it’s important to figure out more specifically what your goals are. Are you trying to buy investment products, have someone manage your money, or are you looking for someone who can help come up with a plan so you have money to invest in the future and live a financially comfortable life?
If the answer is the latter, then look for a CFP or a ChFC. People in these two groups are both trained to be able to offer you what you need, and are far more qualified than the typical financial advisor who don’t have these designations.