People often confuse the terms financial advisor and financial planner and interchange the two. But there are slight differences in the way they work. In recent years, the financial advisor has become the umbrella term for professionals and consultants who advise on finances.
What Does a Financial Advisor Do?
Well, there are too many things to list here. At its core, the financial advisor is somebody who helps manage your money, and that typically means investment. However, they may also assist you in brokering the purchase or sale of funds and stocks. They will also help manage your estate, the type of insurance you need, as well as your tax or retirement plan.
Financial advisors who work with the public must possess a Series 65 license. They must also secure certificates involving the type of service they offer.
To put it simply, financial planners can claim to be financial advisors. However, financial advisors are not financial planners because that is not necessarily what they are. Or to rephrase, anybody can call themselves a financial planner, even if they do come from a broad spectrum of backgrounds.
So, going by this spectrum, the financial advisor can also be an insurance agent, stockbroker, banker, estate planner, tax consultant, and so on.
What Does a Financial Planner Do?
One misconception about the financial planner is they only help individuals manage their household budgets or savings. But financial planners also work with companies to meet their short-term and long-term financial goals.
The planner should have a solid foundation in taxes, investment, taxes, estate, and retirement planning. They should hold a license, such as a Chartered Financial Analyst, Certified Financial Planner, Certified Investment Management Analyst, and Chartered Financial Consultant.
But financial planners are also educators. They need to help you become more self-aware about how to manage your finances better to prepare you for the future. The essential aspects would be savings and budgeting your household expenses. The primary goal is to make you self-sufficient, which is a unique characteristic of the profession. Can you think of other types of occupations that teach clients to be less dependent on them?
Of course, when you have gained enough knowledge and amassed enough savings, you want to find a financial advisor to help you invest your money.
The 2019 CNBC Invest in You Survey showed a glimpse of what Americans are feeling for the economy in 2020. The results revealed that about 65% of the respondents think that the country would be in a recession next year.
But would not that motivate them into taking steps to manage their finances better? They should prepare for the incoming onslaught. The good news is that the respondents believe they are doing something to reinforce their finances. Among the actions they undertook were building up their kitty funds and reducing their debts.
However, 9 in 10 Americans are trying to manage their finances without outside help. Only 1 in 10 said that they hire a financial advisor.
So, why are Americans hesitating? The Internet is a double-edged sword. With a lot of DIY videos and information out there, people think that they do not need the help of a financial advisor. However, it is strongly recommended that you try to talk to a financial advisor to know your options. At the very least, you will realize that they are more than simply managing your household budget.