Financial Advice vs Financial Planning


Protect Your Assets…Know the Difference


You are building generational wealth. As you do, you need to be keenly aware that you must be a partner in managing your assets…not a spectator. You need to know the difference in Financial Advice versus Financial Planning.


Financial Advice: Communication that, based on its content, context, and presentation, would reasonably be viewed as a recommendation that a Client take or refrain taking a particular course of action. Financial Advice is the financial planner’s tool.


Financial Planning: Collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances. Financial Planning is a ‘process,’ not a document, sales brochure, investment, or insurance product.


How Do I Know: What factors will determine whether a Certified Financial Planner (CFP®) professional is required to provide Financial Planning when providing Financial Advice to a Client, as required under CFP Codes and Standards?

CFP Board will weigh the following five factors:

  1. The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect. This factor requires a CFP® professional to review the Financial Advice the CFP® professional will provide to the Client and determine how many of the Client’s needs or wants the Financial Advice may affect. Financial Advice concerning one relevant element of the Client’s personal and financial circumstances may (or may not) be sufficient to require Financial Planning.

  2. The portion and amount of the Client’s Financial Assets that the Financial Advice may affect. This factor requires a CFP® professional to review the Financial Advice the CFP® professional will provide to the Client and determine the portion and amount of the Client’s Financial Assets the Financial Advice may affect. This factor focuses on both the portion and amount of Financial Assets. The effect on Financial Assets is just one factor that CFP Board would weigh in conjunction with others.

  3. The length of time the Client’s personal and financial circumstances may be affected by the Financial Advice. This factor requires the CFP® professional to assess the length of time the Financial Advice may affect the Client’s personal and financial circumstances.

  4. The effect on the Client’s overall exposure to risk if the Client implements the Financial Advice. Relevant risks include investment risk, interest rate risk, and inflation risk.

  5. The barriers to modifying the actions taken to implement the Financial Advice. This factor requires the CFP® professional to assess how difficult it would be for the Client to unwind or modify the action taken to implement the Financial Advice.

Key Point: The CFP must not only know the path. The CFP must walk the path.


Get More Details at: CFP Roadmap. The guide to the CFP Code and Standards.

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