A financial advisor will consult with your financial planner, they are looking at one-off transaction, whereas your financial planner is looking at the long term
There is no shortage of jargon in the financial sector, much of which many people may feel has been specifically designed to confuse laypeople. However, this is seldom the case as the industry is highly complex, highly specialised, and where people wade into the waters of the market without the property understanding, knowledge or advice, it can be extremely costly.
There are several key professionals that provide financial advice to you as individual investors, these include your accountant, stockbroker, financial planners and financial advisors.
Investors or “a person who has aggregated net assets of $2.5 million or has aggregated gross income for each of the last two financial years of at least $250,000 a year can be classified as a Sophisticated Investor”[1] They have a further range of investment specialists that deal in many off-market transactions that have much higher risk/reward variables.
So, when it comes to accountants and financial planners, we will discuss that later in this book, however, there is one area that people are often confused by definition – and rightly so – the difference between financial planners and financial advisors.
As such, we thought it pertinent to provide a definition on both, and how their services can provide you with advice and expertise upon your investment journey.
A financial planner is considered a ‘broad brush’ approach to your financial matters. They are looking at the long term, providing an ongoing service – starting with a financial roadmap - with what should be considered a holistic and comprehensive approach.
A financial planner’s role is to guide you through your ongoing financial journey, providing support and services to iterate your roadmap (financial plan) as life’s challenges present themselves along the way.
A financial advisor, even an independent financial adviser, tends to focus on a single problem. They don’t take into account the big picture. Instead, they look at the question narrowly, only advising you on what you have asked for.[2]
Advisors focus on how to invest a pool of money – such as an inheritance, windfall or other financial benefits, into a product as a one-off transactional approach. Within the narrow focus, they are looking for financial products – such as a real estate fund – that may not be available on the retail markets, but provide a solution to your short term need – ie: establishing 15% p.a returns on an investment of $250,000 over a maturity period of 3-years.
While a financial advisor will consult with your financial planner, they are looking at one-off transactions, whereas your financial planner is looking at the long term. It is also true that many financial advisors have regular communications with financial planners, so they are aware of the suite of products the advisor may have available at any given time.
The key differentiator is, however, a financial planner is long term and holistic, whereas a financial advisor is a short term and one-off. Both are required at different stages of your investing career; however, it is an important distinction on who is responsible for what and why in this your financial journey.
[1] https://www.morgans.com.au/private-clients/Sophisticated-Investor-Panel
[2] https://frazerjames.co.uk/financial-advisor-financial-planner-the-difference/