Many financial professions exist out there. All of them have been created in order to serve you. Knowing this it becomes important to realize what each profession has to offer so that you can benefit the most from their services.
Two of the most widely used financial services are financial planners and financial advisers. The difference in their names does suggest a difference in their function and services. Here is a comprehensive list of their specific functions and the difference in service:
Different Specialization And Services
The first obvious difference is the specialization of both professions. Financial advisers have a broader field of expertise with three sub-specialization categories. As their name suggests, these experts provide various forms of financial advice to individuals and families.
Each financial adviser will select her sphere of expertise. This will be the field or field of specialization on financial advice to be rendered to clients on one or more specialized financial products. These may include specific advice for:
- Non-basic deposit and payment products;
- Investment products for stocks, bonds, and derivatives;
- FOREX products,
- Government stocks, debentures and bond investments;
- Investment life insurance products;
- Managed investment portfolios;
- Carbon credits;
- Crypto money management;
- Tax optimization advice;
- Budgeting advice and support;
- Aged care advice, and even decision-making advice.
Depending on the specific form of advice they render financial advisories may be:
- Registered representatives (commonly known as brokers),
- Investment adviser representatives (or investment advisers) and
- Financial planners.
Hence financial planners are a type of financial advisers. However, not all financial advisers are financial planners.
Financial planning also has its sub-categories of specialized experts. These will help with achieving various financial goals, which you may have. Such are:
Superannuation is part of retirement planning, but is also a stand-alone service, as managing your super funds is critical to achieving your retirement goals;
- Debt management experts
Living off credit card debt is not a good idea. Debt planners and managers can help you use debt wisely and efficiently;
These financial planners help you prepare for your retirement years, organise your retirement planning and reach your retirement goals;
Wealth management companies, wealth management financial planners help you manage, protect and grow your wealth, also catering for appropriate insurance coverage along the way;
These financial planners support clients with acquiring and managing their assets and properties.
Both financial advisers and financial planners are rather important and responsible professions that require licensing. This means that only adequately qualified experts will be able to practice these professions.
Licensing
Financial advisers will need to have an Australian Financial Services (AFS) license. This means that they have the necessary level of education and have successfully passed the necessary exams (namely the financial adviser exam). The AFS license also means that the financial adviser will adhere to the Financial Advisers and Planners Code of Ethics. This licensing procedure suggests (but does not guarantee) that the financial service which you will receive will be of the necessary quality and meet certain standards of service.
Financial advisers also need to adhere to specific Professional Standards for financial advisers.
Following their licensing, financial advisers are entered into the Register of Financial Advisers which is maintained by the Australian Government on MoneySmart. In this way, you may easily check the legitimacy of any financial adviser.
Being part of the financial adviser community, financial planners undergo the same licensing procedure. However, as financial planners are a bit more specialized in the services they render, they must also undergo an additional certification by bodies like the Financial Planning Association of Australia (FPA). In this way, they become Certified Financial Planners (CFP).
Time Horizon
Another differentiator between financial advisers and financial planners is the time horizon of the services they provide.
Financial advice may and usually is a single-issue Q&A. An example may be a client seeking advice on the best way to act upon the inheritance of shares. Financial planning, on the other hand, can only work if it is an ongoing service. Quite often it may be a service for life. An example could be your goal setting for retirement, a retirement planner elaborating your retirement strategy, ongoing monitoring and support of your progress, adjustments on certain occasions (say marriage).
Just Business Or Personal
Financial advice may be general or personal. Financial planning can only be a personal service.
Financial advisers may be hired for a once-off general financial consultation. This is the type of advice that does not take into account the specific needs and circumstances of the individual customer. They may also provide personal financial advice which takes into account the individual needs of their client.
Financial planners on the other hand can only provide personalized financial support and planning, which takes into account the comprehensive circumstances of their client.
Single Point Or Comprehensive
Financial advisers also differ from their planning brothers in the scope of service provided.
Financial advisers can, and usually provide advice on single topics which are quite separate from all else. This advice, as stated above, may even be general with nothing to do with the client herself.
Financial planners, on the other hand, can only render their service if it is a comprehensive one. It will be impossible to plan for retirement and not take into account the client’s estate strategy or debt management. Plans just do not work if they do not take into account the whole picture.
Conclusion
By now you probably have a good idea of the differences between financial advisers and financial planners. To wrap it up in just a few words – you will seek the services of the former normally for getting advice on specific financial questions. You will seek advice from the latter when you have some specific long term goals and wish to find the most appropriate way of achieving them.
