“Are you a financial advisor, or a financial planner?”
I’ve had a handful of people ask me this at events I’ve attended or spoken at, and I can understand why people pose the question.
You don’t just have to figure out the differences between a financial advisor vs planner. There are countless different titles people will use to describe themselves.
For example, how many of these have you heard before?
- Financial planner
- Financial advisor
- Wealth manager
- Investment advisor
- Wealth planner
- Financial coach
There may be other variations of the above that you’ve seen on business cards, too. So what are you supposed to make of all these different titles?
I’ll let you in on a secret most people in the financial world won’t tell you: those titles don’t mean a thing.
What’s in a Name? Not Much, Says the SEC
That doesn’t mean someone who calls themselves a financial advisor or a financial planner can’t help you. It just means that the job title any financial professional chooses to use doesn’t tell you anything about their credentials, qualifications, or intentions.
The SEC has a great resource on this that even most financial adivsors don’t know about. You can check out the PDF here, or check out what it says about “professional titles”:
The Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy and the North American Securities Administrators Association (NASAA) are jointly issuing this Investor Bulletin to help investors better understand the titles used by financial professionals. The requirements for obtaining and using these titles vary widely, from rigorous to nothing at all. To use certain titles, a financial professional may need to pass exams, meet ethical standards, have relevant work experience, and undertake continuing education. Other titles, however, may be obtained with little time, effort, and experience.
Neither the SEC nor NASAA endorses any financial professional titles. We encourage you to look beyond a financial professional’s title to determine whether he or she can provide the type of financial services or products you need.
Some titles are granted by private organizations, such as a trade group. While some private groups that grant titles may provide a method for you to complain about one of their members and can discipline a member for misconduct, there are other groups that do not take complaints or discipline their members.
Still other titles may be simply purchased, or even made up by financial professionals hoping to imply that they have certain expertise or qualifications; such titles are generally marketing tools and are not granted by a regulator. As with any title, you should verify a financial professional is really qualified to advise you.
Pretty crazy, right? The SEC says most titles are just marketing tools! That’s why someone like a life insurance salesperson can call themselves a “financial planner” — even if they do no actual comprehensive planning for you beyond convincing you to buy a bigger (and more expensive) insurance policy than you actually need.
The answer to what’s the difference between a planner and advisor isn’t necessarily “nothing.” The real answer is, “the job title doesn’t give you enough information to know if there is a difference, and if so, what that difference is.”
Instead of Debating Financial Advisor Vs Planner, Ask This Instead
Personally, I use the term “financial planner” most often to describe myself when people ask what I do.
But far more important than that job title is the fact that I (and my financial planning firm) have some other distinguishing characteristics that can tell you about the kind of work I do:
- Fee-only, which means the only payments received come directly from clients. Beyond Your Hammock doesn’t sell products or earn commissions or kickbacks from third-parties. That removes financial conflicts of interest from the relationships we have with clients and helps pave the way for truly objective advice.
- Independent, meaning we don’t have any other company or brand to answer to (whereas registered representatives or insurance agents have to answer to the company that sets their sales quotas). BYH is a Registered Investment Adviser, meaning we’re regulated by the SEC and the Commonwealth of Massachusetts, and we uphold strict compliance standards set to protect consumers.
- Fiduciary, which means Beyond Your Hammock, myself, and everyone who works for the firm is both legally and ethically held to the standard of working in your best interest. We always put client interests first — and, although it may be surprising, that’s not the norm across the industry. People who are not fiduciaries tend to follow the “suitability standard,” which means they only have to do what’s suitable for you… not what’s best.
I’m also a CFP® — and that’s one term that can actually give you some insight into someone’s credentials. It stands for CERTIFIED FINANCIAL PLANNER™, and it indicates that people who hold these marks have been highly trained and educated in how to provide comprehensive financial advice that can address needs in all areas of your life.
Instead of asking about financial advisor vs planner, or what someone’s job title is, these are the areas you’ll want to ask about when you talk to a financial professional. They can call themselves whatever they want — but more important is:
- How they charge (fee-only, fee-based, or commission?)
- What standard of care they uphold (fiduciary or suitability?)
- What they’re trained to do (are they a CFP®, CFA, CPA? Do they hold other designations that indicate skill and knowledge in the area you need help with?)
In addition to all that, you can get a clearer sense of what someone can do for you by asking what kinds of clients they work with (are they similar to you in age, lifestyle, wealth level, family circumstances, types of goals), what problems they typically help clients solve (do those sound like the same kind of challenges you face?), and the specific services they provide (does that align with your needs?).
Now, you’re in on the secret: job titles don’t tell you too much about the person who says they can help you with your money. Take the time to dig a little deeper and get all the details on what they actually do, why they’re qualified, and how they make money.