Distinguishing between financial planning and financial advising can be confusing, especially if you don’t have a background in finance. What are the differences between financial planners and financial advisors – and which service is right for you?
In this article, I’ll help you clarify your understanding with information based on decades of experience as a Seattle financial advisor. We’ll walk through both roles in simple terms, review scenarios where each service might be helpful, and detail the differences between them so that you can identify the best path forward for your needs.
Ready to get started? Let’s dig in and walk through these two terms.
What is a financial planner?
Let’s start with the activity of financial planning, first.
Financial planning is a point-in-time analysis of a client’s financial situation. It takes into account things like retirement assets, life insurance, and annuities to create a comprehensive picture of the present moment, as well as a path forward.
As such, the fee structure for financial plans is typically episodic (meaning you’re charged per plan). While financial planning can involve an ongoing relationship (such as, say, annual check-ins to ensure progress is aligned to the plan), it usually does not involve continuous investment advice.
“A financial planner guides you in meeting your current financial needs and long-term goals. That typically means assessing your immediate financial situation, understanding what you want your money to do for you (both now and in the future) and helping create a plan to get you there.”
Scenarios where financial planning might be helpful:
- Your income has significantly changed (you’ve changed jobs or gotten a raise).
- Your expenses have significantly changed (your family is growing, or you have new considerations like medical costs).
- You’re considering buying real estate.
- You’re considering going back to school (or paying for a family member’s education).
- You need a financial road map, but you don’t currently have a large portfolio.
- You’re tired of financial confusion and want to follow an intelligent wealth building strategy.
In general, financial plans can be cost effective investment advice for individuals who like to implement and monitor the investment process themselves.
What is a financial advisor?
Financial advising is more generalized than financial planning. As I’ve written before, most commonly, the term “financial advisor” refers to a professional who offers customers guidance on considerations related to money. This can be broken down further, though.
Investopedia elaborates on the services of financial advisors, noting that “Financial advisors, or advisers, can provide many different services, such as investment management, tax planning, and estate planning.”
That’s just a start, though.
- Financial planning (as we’ve noted above!)
- Insurance planning
- Risk management
- Employee benefits planning
- Tax planning
- Retirement planning
- Investment selection and management
- Real estate planning
- Debt management
- Emergency funds management
- Estate planning
- Philanthropy and charitable giving
- Small business planning
It’s important to note that financial advisors must have certain certifications depending on the services they offer – as you’re searching for a financial advisor in Seattle, check which certifications are relevant to your needs.
With those services noted, let’s take a look at a few real-life scenarios where they might be delivered.
Scenarios where financial advising might be helpful:
- You’re approaching retirement or your risk profile is changing.
- You’ve started a business.
- You’ve inherited money and want to manage it intelligently.
- Your family status is changing – you’re marrying or getting a divorce.
- You want confidence that your wealth is being managed prudently.
While the services provided in each of these scenarios will differ based on your unique context, generally, financial advising is helpful when your situation is financially complex or when it’s changing significantly. It also makes sense when you just want to outsource this function to somebody else to work on your behalf.
Remember, though, this is a general term, so be sure that as you search for a Seattle financial advisor, you clarify your intent to find the right solution.
What’s the difference between a financial advisor and a financial planner?
With both definitions considered, let’s answer our initial query: the difference between financial advising and planning.
Financial planning falls under financial advising but doesn’t include active or ongoing management. So, financial advisors can create financial plans. But someone who is strictly a financial planner would not actively manage investments or guide the outcome of the plan.
Looking for financial planning or financial advising services in Seattle?
Hopefully, this information has been helpful as you consider your own financial planning or advising needs. If you’re looking for more guidance, let’s talk.
I’m the sole practitioner at Sapling Wealth Management, a boutique advisory firm that provides thoughtful, tailored financial guidance to individuals here in Seattle. I offer both customized financial plans and ongoing wealth management. If you’re ready to grow your assets with thoughtful investment advice, we may be a good fit.
Schedule a review of your portfolio today, and let’s take the first step toward figuring out what’s best for you.