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Navigating Financial Literacy: Choosing Between an Investment Advisor and a Financial Planner

Navigating Financial Literacy: Choosing Between an Investment Advisor and a Financial Planner

May 09, 2024

You may have heard that arctic cultures have a remarkable number of words to describe the phenomena that we in more moderate climates call “ice.” When one lives in a place defined by extreme weather, it is valuable to learn and understand all the different ways that ‘ice’ may present itself – in fact, it is a key to one’s survival.  

Speaking of valuable skills and information and survival - did you know that April was Financial Literacy Month? What does financial literacy mean to you? I find there are lots of different interpretations and often people nod their head as if to say, “Yes I know what it means.” But if we ask them to define or elaborate on the topic, we will get many different answers – most will have some truth but will also be characterized by a lack of distinction.  

Ask yourself:  

  • What skills define financial literacy?  
  • How does one become financially literate?  
  • What areas do I need to understand to be considered financially literate?  
  • How will being financially literate help me?  

Often, people seek the help of financial professionals to better understand products or services they already have or may need. As a financial planner, I wanted to add my voice to last month's Financial Literacy Month by engaging the question, “What is financial advising?” As much as it sounds straightforward and most would nod their head in assent if I asked if they know what it means, in my experience there is some distinction that can add value.  

My first question when people tell me they have a financial advisor is, “Are they a financial advisor or an investment advisor?” (Full disclosure – as far as the financial regulatory bodies are concerned there is no difference. Anyone who has passed the Series 65 Uniform Investment Adviser Law Exam can and generally does use the title Financial Advisor. Stay with me though as some further distinction instructive.) The answer I get from 90% of people is, “What’s the difference?” Although they are correct that it demonstrates how people have come to equate financial advice with helping with their investments. I attribute this to people being conditioned by what they have seen and experienced in the marketplace and by the fact that people who work solely or primarily in the investment business are called financial advisors. This is a dangerous perspective. 

So, why would focusing only on growing my investments not be the best thing for a family to fulfill on their goals and dreams?  

First off, and this is critical, no two advisors are the same. Consider this question to better understand which financial professional is best for you to be working with. This should not be thought of as a casual exercise – if your hopes and dreams hinge at least partly on your financial success, and you want someone to be able to provide advice throughout your life, then this is an important decision. You should ask questions and make sure this person demonstrates an interest in getting to know you and is not just concerned with your investable assets.   

Let’s think about this a bit. A new advisor fresh from passing their Series 65 exam needs to earn a living. How do they get paid? Generally, it’s a fee assessed on the assets they have aggregated under their management (Assets Under Management = AUM). Where are they starting? At zero. Their goal then, and what their employer will train them in, is how to find and enroll new clients. Do they need to know about investments? They do – enough to pass the exam. Will it be valuable for them to gain experience and know more? Yes, but without clients they are out of business, so their first obligation is to continue to grow their client base and AUM such that they can stay in business and can earn more. Does knowing more about other topics – for example tax, debt, real estate – help them earn more money? Let’s say they help a client make a choice of a new mortgage, does that make them money? Generally and directly, no. We can see how that would help them provide more value to clients and over time build their business and their income. All this is to say that the strongest financial incentives are to find more people with more money and bring those assets under the advisor. Don’t get me wrong, they can bring a lot of value by doing so. However, there is much more to the puzzle of being financially successful.  

My assertion is that there is much more value that can be added. A financial advisor who works at a higher level (call them a holistic advisor) and is focused first on your overall financial health and success, and then on how your investments support that, can provide that additional value. So, what else might be involved in a family’s financial success? Here are some areas: 

  • Cash flow 
  • Debt structure 
  • Saving and budgeting 
  • Earning more income 
  • Real estate 
  • Taxes 
  • Retirement strategies 
  • Insurance 
  • Estate Planning 
  • The purpose of your money 
  • Business ownership 
  • Mindset 
  • Banking 
  • Financial balance 

Note that everything on this list is interrelated. If I recommend converting a Traditional IRA to a Roth IRA, then I intend to help the client understand where it would be best to take the money from to pay the taxes and why it would be worth doing so. A holistic advisor is more interested in and able to help with looking at how all these pieces of your financial system work together. And it is truly a system, with many opportunities to optimize your performance, only one of which is to help you do better with your investments.  

Probably the most important item on that list, and often overlooked, is the purpose of your money. What does that mean? Ultimately, given that money is intertwined with everything in our lives, then making good financial choices (and getting good financial advice) is key to fulfilling on those things that are important in your life. 

Americans live very busy lives with seemingly limitless opportunities to spend and enjoy their money. The challenge is that amidst the chaos, we often miss the forest for the trees, and don’t have a good handle on our own personal financial system. It is not uncommon for people making high 6 or even 7 figure incomes to struggle to understand how they are doing, what retirement will look like, or what they are spending their money on. You’ve probably heard the saying, “spending rises to meet income.” I often have people say to me, “We think we’re doing ok, but we’re not really sure.” I usually find they are doing “OK.” These people can afford to waste money, and almost always are, unbeknownst to them. And when they see that and understand the impact it has, they gain more power to fulfill on what’s most important to them. By helping them clarify what is important in their lives and what they are doing with their hard-earned money, a good advisor can help people make more powerful choices that enable them to realize their goals and dreams. 

Lastly, what is a financial planner?  

Some financial advisors can call themselves financial planners. It’s not generally an official distinction under the financial regulations. A financial planner is an advisor who does holistic planning for clients and may charge specifically for that service, helping people understand all the interrelated pieces of their financial world and how best to optimize them and improve their clients’ lives. The Certified Financial PlannerTM (CFP®) designation is a well-regarded certification, one that gives clients some certainty in the skills and experience (in addition to a rigorous course of study and passing the qualifying exam, advisors are not able to use the designation until they have several years’ experience). Having said that, even if an advisor has a CFP® designation you still want to delve into their background, work situation, and philosophy to determine if they are a good fit for you.  

Just as someone who lives in the arctic must understand all the ways that ice impacts their survival, you must understand all the ways your finances impact your current and future life. If you are unsure about your situation, you are not alone! I invite you to a conversation to see how we can work together to help you find freedom, fulfillment, love, and confidence for yourself and your loved ones. 


Aha Financial offers fee-based planning, wealth advisory services, and securities through Park Avenue Securities LLC (PAS) and insurance through The Bulfinch Group Insurance Agency, LLC. Fee-based plans may include tax and wealth planning suggestions, but we do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation. Investment Advisor and Registered Representative of PAS and insurance broker of The Guardian Life Insurance Company of America (Guardian), supervised from: 160 Gould Street, Suite 310, Needham, MA 02494, 781-449-4402. PAS is a member of FINRA & SIPC and a wholly-owned subsidiary of Guardian. Aha Financial and The Bulfinch Group are affiliated, but neither are an affiliate or subsidiary of PAS or Guardian. 2024-173340 Exp 5/26