Before I jump into the main topic, allow me to address the potential distraction of “advisor” vs. “adviser.” Both spellings are technically correct for our purposes. I prefer “advisor” for a couple of reasons. First, I feel that “advisor” conveys a certain respectability and panache that “adviser” just seems to lack. Second, my broker-dealer refers to “advisory” services, and I don’t want my clients thinking one of us can’t spell.
Back to the main topic – is there a difference between a financial planner and a financial advisor, and, if so, what might that difference be?
Advisors Should Be CFP Professionals
First off, I firmly believe that anyone who calls himself/herself a financial advisor or financial planner should be a CERTIFIED FINANCIAL PLANNER professional. Those who aren’t willing to make the effort to attain the gold standard of credentials for our profession need to find another line of work or stop referring to themselves as a “financial” anything. You can be a stockbroker, insurance agent, whatever, but if you are calling yourself a financial planner or financial advisor, I believe you must earn that privilege by earning the CFP designation. If you are able to put the words “CERTIFIED FINANCIAL PLANNER” after your name, you’ve told people what they most need to know about you – that you care enough about the quality of your service to become as good at it as you can possibly be.
Roadmap or Trusted Guide?
When I think about our roles as financial planners, I think about Rand McNally. You know them from their maps, atlases, and globes. You use Rand McNally to plan how to get from point A to point B. Rand McNally can be very helpful in showing you where you are in relation to your destination and in calculating the best way to get there. When we are in the early stages of a relationship with a client, we are their Rand McNally. We are helping them find where they want to go and charting a course to get there with minimal disruption. While this role is very important, I don’t believe it is our most important role. To be just a planner is to imply that, after the trip is planned and the course is set, our clients make their journeys alone. While I have used Rand McNally maps on many trips over the years, neither Rand nor McNally ever made the trip with me.
Very often, in our zeal to demonstrate our planner skills, we create such complex financial plans that the clients are overwhelmed by them, and, as a result, little of the plan ever gets implemented. It’s not unlike buying a huge map that covers all the places you plan to travel to, then finding the map is so hard to fold and unfold that it sits in the glove box, unused. A plan is a map, and any map is good only to the extent that it isn’t overwhelming.
Once the initial financial plan is made, we then become advisors. We shift from making the plan to implementing the plan. We become less Rand McNally and more Sacajawea.
In case you don’t remember seventh grade history, Sacajawea accompanied Lewis & Clark on their transcontinental explorations over two hundred years ago. Sacajawea’s arrangement with Lewis & Clark was unique, especially for that era. She committed to Lewis & Clark for as long as it took to complete the mission. She brought all her expertise and experience to bear. She risked life and limb on a daily basis. She had a stake in the outcome. Because of the importance of the mission, Lewis & Clark didn’t simply pick up the 1800’s equivalent of a Rand McNally atlas and head west. Lewis & Clark knew they needed more than information. They needed people committed to the success of the mission.
Clients’ Wants, Needs Differ
If you’ve been in this profession for any length of time, you know that what a client wants and what a client needs are often two very different things. Many people come to us thinking they want a plan. We unconsciously promote that line of thinking by calling ourselves financial planners. They want from us the equivalent of a Rand McNally map showing them how to get to the financial Promised Land. They think that is all they will need to find financial success, and it is often all they are willing to pay for.
What these people don’t anticipate are the ever-changing, unknown, and often dangerous conditions they will encounter on their journey. That financial plan is merely a directional guide. In order to achieve their goals, our clients need our steady guidance along the way, keeping them moving in the right direction while avoiding the innumerable pitfalls along the way. Also, because our duties continue every day we have a relationship with a client, our compensation method should reflect our ongoing responsibilities.
No one will ever know if Lewis & Clark ever complained about Sacajawea’s unceasing focus on their mission or whether or not they were paying her too much for her help. What we know is, because Lewis & Clark hired someone who was both qualified and dedicated to taking them across a continent and back, the United States expanded from sea to shining sea.