Why do you need a financial planner if you have an investment advisor?

While financial planners and investment advisors both play essential roles in managing your finances and investments, they serve different purposes and can complement each other. Here’s why you might need both:

1. Comprehensive Financial Planning: Financial planners take a holistic approach to your financial situation. They help you create a long-term financial plan that includes not just investment strategies but also budgeting, tax planning, retirement planning, insurance, estate planning, and more. They consider your entire financial picture and help you set and achieve specific financial goals. Investment advisors, on the other hand, focus primarily on investment strategies.
2. Goal Setting and Prioritization: Financial planners help you identify and prioritize your financial goals, taking into account your unique circumstances and aspirations. They create a roadmap to achieve these goals, which may include investment advice as part of the larger plan.
3. Risk Assessment: A financial planner can help you assess your overall financial risk tolerance, including not only your investment risk but also other risks like health, life, and disability insurance. This broader perspective can guide your investment advisor in tailoring investment recommendations to match your risk profile.
4. Asset Allocation: While investment advisors focus on asset allocation and investment selection, financial planners work with you to determine the most suitable asset allocation for your goals, risk tolerance, and time horizon. This information can then be used by your investment advisor to create a tailored investment portfolio.
5. Tax Efficiency: Financial planners often work with tax professionals to optimize your tax situation. They can provide guidance on strategies to minimize tax liability, which can impact your investment returns. Investment advisors may not offer tax advice to the same extent.
6. Ongoing Guidance: Financial planners can provide ongoing financial guidance, ensuring that you stay on track to meet your goals. They can also help you adapt to changes in your life, such as career changes, marriage, or having children, and adjust your financial plan accordingly.
7. Estate Planning: Financial planners can help you create an estate plan, including wills, trusts, and beneficiary designations, which is crucial for wealth preservation and distribution. Investment advisors typically don’t provide this service.

In summary, a financial planner focuses on your overall financial well-being, goals, and strategies, including but not limited to investments. An investment advisor, on the other hand, specializes in managing and advising on your investment portfolio. Combining both professionals can provide you with a comprehensive approach to financial management, ensuring that your investments align with your broader financial goals and that you receive tailored advice across various aspects of your financial life.