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When it comes to not only managing your money but growing your wealth, there might be a time you will need professional help. Professional help could come in the form of a financial planner or a financial advisor. But what is the difference between the two?
If you earn more than 250,000 a month, most experts say you need someone to look after your finances and help guide your investors.
“Every financial planner is a type of financial advisor, but not every financial advisor is considered a financial planner. There are more than 100 certifications that a financial advisor might attain,” Investopedia reported.
Breaking it down, a financial planner is a professional who helps people and organizations create a plan to reach long-term financial goals.
Meanwhile, the category “financial advisor” is much broader and can include brokers, money managers, insurance agents, or bankers. A financial advisor must pass the Financial Industry Regulatory Authority’s Series 65 licensing exam.
Regarding services, a financial planner will help map out a plan for budgeting, saving, investing, and retirement.
There are also different licenses or designations. This includes Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or Certified Investment Management Analyst (CIMA), among others.
To reach each of these qualifications, the financial planner must complete a different set of educational, examination, and work history requirements.
A financial advisor helps manage your money.
Rates for a financial advisor can vary depending on the experience of the advisor. Fees can range from $2,000 to $5,000 on various projects such as crafting an estate plan for a client. Advisors can also charge clients hourly rather than commissions or a certain percentage of assets under management. It all depends on the type of advisory services a client needs, Investopedia reported.
Financial planners can charge a percentage of assets under management, small accounts just aren’t worth the time. A planner who charges 1 percent of assets probably won’t want to manage a $100,000 nest egg, for example; It would generate only $1,000 a year in income for the planner, according to the American Association of Retired Persons.
Many feel Black investors should use a Black financial advisor, who might have a better understanding of the needs of Black people in America and the financial obstacles they face because of race.
But there is a significant void of Black certified financial planners (CFP). But that’s changing. In 2020, Black certified financial planners in the U.S. grew 13.8 percent from the previous year. But there are still only 1,652 Black CFPs, and they make up less than 2 percent of all CFP professionals, NerdWallet reported.
To find a Black financial advisor, start your search with the Association of African American Financial Advisors’ Find a Financial Advisor tool.
Photo: RODNAE Productions, Pexels, https://www.pexels.com/video/a-man-and-a-woman-talking-at-a-meeting-7821852/
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