There are a lot of F words,
especially in the world of finance. Fiduciary, Finance, Financial Advisor, etc. But none of those are my favorite F word.
My favorite is “Female Financial Planner”. Ha, you thought I was going to pick a different F word, didn’t you? I also like “french fries.”
It can be confusing when you are trying to figure out the world of financial advisors. For some there can be a visceral negative reaction when you hear the word “financial advisor.” I am here to help explain the ins and outs of this term and others, and also help you become more comfortable with the role of a financial advisor.
So, let’s start with financial advisor vs. financial planner.
Every financial planner is also a financial advisor, but not every financial advisor is a financial planner.
Clear enough? Ok. Great talk. See you next week.
Basically, “financial advisor” is a very broad term for someone who helps you with money. This could include managing investments, taxes, retirement, estate planning, life insurance, budgeting, etc., it’s like the broadest term out there. And in the not very distant past, essentially, you could call yourself a financial advisor with the barest of backgrounds in actual finance. The stockbrokers in the 80s—think, Charlie Sheen in Wall Street—didn’t even need college degrees. You could pass licensing exams and then sell people stocks. Nowadays (what am I, old? Who says this?) you pretty much need a college degree before any major investment firm will hire you, but you still aren’t required to have any advanced designations* other than the basic licensing exams to be a financial advisor.
*Advanced designations = letters after your name meaning you have passed other, much harder exams, like the CFP®/Certified Financial Planner designation.
Then, there is financial planner—which is a type of financial advisor. Typically, these people work to set financial goals with you and then monitor and work towards those goals. Usually, but not always, these people have some sort of advanced designation (like the CFP above, or Charter Financial Analyst (CFA), Certified Investment Management Analyst (CIMA) or others).
A financial planner and a financial advisor can be the same person.
Clear as mud.
There are some financial advisors who really only focus on the investment piece-where they tell you how to and/or directly invest your money-what to put it in, product-wise. As computers learn more about investment algorithms, that is where you see more robo-advisors come into play.
What a computer (robo-advisor) doesn’t do is tell you if you should look at refinancing your mortgage to pay off student loans, or whether you should put your money in a 529 plan for college savings, or keep it in a taxable account like an UTMA because you’re not sure if your kid is going to college or not. This is where a financial planner is going to help. A good financial advisor/planner can help you through the advice side of money questions. There’s also a lot of emotional and behavioral aspects to managing your money… so it’s nice to have someone you can bounce things off of even if it’s just to talk you out of doing something based on your emotions.
Before I let you go, I wanted to address one more F word: fiduciary. I could really write a whole other blog just about this, but I will tell you that a fiduciary is someone legally required to act in your best interest. Essentially—if I’m a fiduciary (which I am), I won’t advise you or sell you something knowing it’s not the right thing for you. This link provides a really good explanation of who is held to a fiduciary standard. Again, it’s like the financial advisor/financial planner thing—a fiduciary is legally obligated to put the client’s interest ahead of theirs, but not all financial advisors are legally required to be fiduciaries. Spoiler alert: CFPs are (required).
In case you didn’t know, I’m one of the people who gives advice about money. I’d love to help you think about your finances, plus I am approachable and super fun to talk to. Even if you have no idea what you’re doing, I can help provide some clarity on what you need to start looking at, and I’ll straight up tell you if I can’t help you or if what you need is simple enough that you can do it on your own. If you’re interested, you can learn more about me here or hit me up at my email: Jill.Carr@stephenswmg.com.
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