What’s the Difference Between an Investment Advisor and a Financial Planner?

January 17, 2020 - 4 minutes read

What’s the difference between an Investment Advisor and a Financial Planner?

What’s the different between an Investment Advisor and a Financial Planner? They both provide important assistance, However, there are some important differences between what either can do for you.

What's the Difference Between an Investment Advisor and a Financial Planner?

Some similarities, but many differences.

What Does an Investment Advisor Do?

An Investment Advisor assists you with planning, making and managing your investments. So they will work closely with you to assess and understand your financial situation. Additionally, they will help you determine your investment goals. This includes assessing your risk tolerance and crafting, executing and managing an investing strategy just for you. (For additional reading, see our recent blog post, “Is the Stock Market the Best Place to Grow Your Money?“)

But you’ll want to be sure that you are dealing with a fee-only Registered Investment Advisor (RIA). RIAs register with the U.S. Securities and Exchange Commission (SEC), and are bound by fiduciary responsibility. This means they are obligated to work for your best interests. Because they work on a fee-only basis, they truly work for you.

Fee-only Registered Investment Advisors are Fiduciaries

Your best interests are protected by a Fiduciary.

Specifically, according to the Securities and Exchange Commission rules and the Investment Advisors Act of 1940, the five responsibilities of a fiduciary are:

  1. Put clients’ interests first.
  2. Act with the utmost good faith.
  3. Provide full and fair disclosure of all material facts.
  4. Do not mislead clients.
  5. Expose all conflicts of interest.

So What Does a Financial Planner Do?

Financial planners provide advice designed to create, protect and grow wealth for their clients. So, they assist with retirement planning, estate planning, and insurance planning. In some cases they may also help with limited investments (but not creating and/or managing stock investment portfolios). While Financial Planners are held to a suitability standard, they are not required to be fiduciaries. As a result, they could offer you certain financial products that are influenced by commissions.

What's the Difference Between an Investment Advisor and a Financial Planner?

The Suitability Standard is different than fiduciary responsibility.

If you are going to work with a Financial Planner, look for those who have earned the certified financial planner (CFP) certification, or that of Chartered Financial Consultant (ChFC).

Similar, but Different

Investment Advisors and Financial Planners both strive to help you achieve your unique financial goals.

If you are looking to build a successful investment portfolio, you can trust a fee-only, Registered Investment Advisor to provide that help.

Identify your Financial Goals

When you know your needs, you’ll know which financial professionals can best help you.

Or, if you need assistance in building long-term financial plans that include retirement, asset protection/insurance, estate planning, and/or growing your wealth in other ways, a Certified Financial Planner might fit your need.

If you are actively investing, or thinking about starting, you’ll want to visit with a Registered Investment Advisor. To learn more, download our free eBook 3 Things an Investment Advisor Should Do for You”.

3 Things an Investment Advisor Should Do for You

Anatoliy Cherevach is a Chartered Financial Analyst and a Portfolio Manager with Kunath Karren Rinne & Atkin, LLC, with over 19 years of portfolio management and security analysis experience. Prior to joining KKRA, he was a Portfolio Manager and Research Analyst with Cohen & Steers. Anatoliy holds an MBA in finance from Pacific Lutheran University. He is an active member of the CFA Institute and CFA Society Seattle.

Anatoliy Cherevach

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