Financial Planner or Investment Advisor – Which is Right for You?
Is there a difference between the terms financial planner and investment advisor? What separates an investment advisor from a stock broker? Often the public does not really know and the financial industry is not always eager to clarify. Let’s have a closer look at who does what.
Someone known as a financial planner is most likely to be found working for an independent firm that is not connected to the brokerage industry. They may even work out of their home. Their focus and training has been in the basic planning functions. This would include retirement, insurance requirements, and education funding. This advice can assist with clarifying goals and establishing a plan for achieving them. On the investment side they are limited in scope to services and products they can offer. Here you can find a selection of mutual funds or GICs but more sophisticated avenues are closed off. The planner’s income is primarily derived from sales of mutual funds and insurance products.
The other main group is usually referred to as Investment Advisors. Their focus and training has been on managing more in depth investment portfolios. Licensing provides access to a full range of opportunities and services. Individual stocks, hedge funds, IPOs, and flow-through shares are now accessible. In terms of money, the Investment Advisor is able to offer higher yielding products at a lower cost. There is a big difference, for instance, between being able to own individual bonds and buying a costly mutual fund full of bonds. The IA also has more flexibility in generating income. The traditional method of trading commissions and the newer fee-based model are the two main options.
