Both planners and advisors can help you and your family with a wide range of money matters, including financial planning, estate planning, investing, insurance and mortgages. Looking at advisors’ credentials or designations can help you determine what they focus on.
“The designations that someone might look for is going to vary given what their situation dictates,” says Aaron Hector, a CFP and private wealth advisor at CWB Wealth in Calgary. Registered Financial Planners (RFPs), for example, have a high level of financial planning expertise, and their primary vocation is financial planning. A CFP will also have high expertise in financial planning with a depth of knowledge and skills. (More on credentials below.)
“Many financial planners are generalists—they have a comprehensive body of knowledge about all aspects of personal finance, but they may lack niche financial expertise to deal with unique and/or very complex situations,” says Hector. “In those cases, you would want to look for someone who has those unique skills, or as an alternative, working with a financial planner who is comfortable collaborating with other professionals.”
Many financial planners have expertise in working with certain types of clients. “For example, some planners may specialize in working with clients who are business owners, while others may specialize in estate, tax or cross-border financial planning knowledge,” says Hector. He adds that planners often have a network of experts they collaborate with, if needed for a client’s situation.
How are financial advisors and planners paid?
Both advisors and planners may offer one-time and ongoing services, with varying fee structures. One-time services might include preparing a financial plan or providing advice on a particular situation. Ongoing services could include continual reviews of your financial plan or management of your investment portfolio.
“A do-it-yourself individual would likely look for someone who can create a plan that they can then implement on their own, whereas someone else may want to work with an advisor who will manage their investment portfolio for them, and that advisor may charge based on assets managed or based on commissions,” explains Hector. “Someone who needs insurance will have to work with an insurance advisor, who will receive a commission.”
Whatever the service, the fee structure should be transparent, and you should understand the different ways your advisor gets paid, to ensure that your interests and theirs are aligned. “If your advisor is getting paid more to recommend one product versus another, then there is a clear conflict of interest,” explains Hector. “I would ask them to very clearly explain to you why it is also in your best interest.”
What credentials do financial advisors and planners have?
Before you choose a planner or an advisor, it’s helpful to understand the different types of credentials or designations.