Which job is better to have: financial advisor vs. financial planner

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Those entering the profession may be curious about the comparison of financial advisor vs. financial planner. Which one makes more? This is a very direct and to-the-point analysis of their definitions, salary, and job responsibilities.

I’m going to give it to you straight with no fluff. Are you ready?

For those of you who are new to my blog/podcast, my name is Sara. I am a CFA® charterholder and I used to be a financial advisor. I have a weekly newsletter in which I talk about financial advisor lead generation topics which is best described as “fun and irreverent.” So please subscribe!

Differences in job roles

I’ve written about the various financial advisor jobs in other blogs. But just to review:

Financial advisor: definition

Financial advisors are commonly defined as people who manage wealth for their clients, from their investment portfolios to their financial plans. Many, but not all, financial advisors include financial planning with the scope of work that they do.

Financial planner: definition

A financial planner puts together a roadmap for the client that takes into account their goals etc. It may include a budget and cash flow plan. If you want to learn about the process of getting to be a financial planner or a financial advisor, I’ve written blogs on these subjects.

There’s a great deal of overlap in the role of financial advisor and financial planner. The two roles are not necessarily mutual exclusive.

  • Some people are just financial advisors.
  • Some people are just financial planners.
  • Some people are both financial advisors and financial planners.

Financial planning is the trend, my friend

With investment advice becoming commoditized and clients looking for more than just portfolio management, financial planning has become highly demanded amongst investors in Generations X and Y. Industry thought leader Bob Veres thinks financial planning is the future of the industry.

Read these blogs about financial planners who are making a difference.

Hourly financial advisor success story

Flat fee financial advisor success story

There is an up and coming trend within financial planning called “advice only financial advisors.” This means that a financial advisor provides financial planning but not investment management services. It has an appeal because it is viewed as more purely focused on the client’s needs as it removes the products from the equation.

If you are a flat fee, hourly fee, or advice only financial advisor, or looking to become one, join my LinkedIn group for Advice Rockers and join our community!

Difference in salaries between financial advisors and planners

How do financial advisors and planners earn money?

Most of the time, financial advisors are paid on the assets they manage. They may or may not charge for the planning, fi they are doing any. The average financial advisor fee is a little less than 1% of the assets they manage (and 1% is a high fee to make nowadays given all the fee compression). Others work on commission for trades recommended. There are various regulatory differences that apply here, but that’s too boring for me to cover in this blog.

Financial planners, on the other hand, charge hourly (usually between $150 to $400 per hour) or they may charge a flat fee which is usually about $2,000 to $4,000.

Let me put it bluntly: financial advisors make more money than financial planners.

Yeah, I said it.

Financial planners who solely work on flat or hourly fees have a far less scalable business than a financial advisor who can pile on accounts an earn a cut of the assets.

Just a rough sketch of a comparative scenario.

  • Let’s say you’re a financial advisor with 50 clients, each having $1MM in assets. You make 1% on those assets. You’re making $500k a year. (Btw, is 1% good for a financial advisor to earn? You bet your bippy it is, in today’s market. It’s not like it used to be!)
  • Let’s say you’re a financial planner with 50 clients, each paying you $4,000 for a financial plan. You make $200,00 a year. However you may not be able to charge the full planning fee next year, because they may not need a full analysis one year after they just got one.

In this example, the financial planner is making less than half of what the advisor makes. Just a hypothetical scenario (before you send me a nasty email), but you can see how it’s harder to make money as a financial planner than it is as an advisor. You work your butt off when you have to work for an hourly or flat fee as opposed to being on retainer. Most advisors don’t work on hourly or flat fees for that reason. If the industry were set up like that, it would be a far less appealing career than it is currently.

But all of this is changing, as financial planning (see above – advice only, flat fee, hourly financial advisors) are finding new ways to reach clients in a more scalable way, and the demand trends are rising for this kind of service. Investors are becoming more and more disenchanted with Wall Street and its shiny objects. In the future, it is only going to become harder and harder to make money by providing investment advice.

Which job is better to have: financial advisor vs. financial planner

It’s a personal decision highly dependent upon what your values are and what you are passionate about. Some people don’t like the stock market, and they want to help people with finding an overall strategy and focus them on connecting with their life goals. In these cases, being a financial planner is better.

Some people like the stock market and are adept at helping people manage the risks associated with it. In this case, a financial advisor job is possibly good for you.

Or maybe you like both…

To be real, there are alot of people who are in the profession for money, and in that case it’s better to be a financial advisor. I’ve discussed what financial advisors earn in other blogs. To summarize it:

  • A good financial advisor salary is $150-250k per year, after you pass the entry level.
  • A starting out financial advisory may make between $30k to $80k starting salary.
  • Lastly, from my experience, I have found it is not uncommon for them to earn more than $250k.

Data from the Bureau of Labor Statistics states that financial planner median salary in 2020 was $89,330. To me that sounds low, but I wouldn’t see the actual number in reality as being astronomically higher given what I’ve said before about the scalability of financial planning being considerably limited.

Sara’s upshot: comparison of financial advisor vs. financial planner

What’d ya think? Was this helpful?

If yes…

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This is a book about financial advisor LinkedIn messages which contains scripts you can use to get new prospects.

You could also consider my financial advisor social media membership which teaches financial advisors how to get new clients and leads from LinkedIn.

The Sara Grillo membership is a social media program for financial advisors - but only the cool ones.

Thanks for reading. I hope you’ll at least join my weekly newsletter about financial advisor lead generation.

See you in the next one!

-Sara G

Sources

Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Personal Financial Advisors,
at https://www.bls.gov/ooh/business-and-financial/personal-financial-advisors.htm (visited February 08, 2022).

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