What's the difference between a financial counselor and a financial planner?

Financial planners and financial counselors often cover similar types of information with clients.  For example, both are concerned with establishing a plan for spending (a budget), monitoring debt levels, or saving and investing for the future.  But there are differences in tendencies.

Focus

Financial counselors tend to deal more with problem situations.  Usually this involves having more debt than the client can effectively manage.  Financial counselors also help clients establish a spending plan that works within the client’s income.  Some financial counselors partner with nonprofit organizations that help reduce credit payments and eliminate debt over a 2-4-year period of time.  Others offer coaching in a comprehensive plan for spending, saving, earning, and giving.

Financial planners tend to focus more on future financial challenges and needs. These include retirement, buying a home, disability, or children’s educational needs.  Planners help clients set goals for their future, assess their current situation, and plan strategies for helping them reach those goals.

Training

Both financial counselors and financial planners should have training in their respective fields.  This training varies widely.

The most rigorous training and certification process is that for Certified Financial Planners.  This requires a comprehensive course of study at a college or university, and a two-day, 10-hour examination to demonstrate knowledge in tax planning, estate planning, insurance, employee benefits, investment management, and retirement planning.

Financial counselors also have training and certification programs available, such as those offered through the Association for Financial Counseling and Planning Education (http://afpce.org).  Courses include an understanding of the financial planning process, and the specifics of assisting clients deal with specific issues such as debt, divorce, housing and student loans, and problem solving.

The Advantages of Having a Planner or Counselor

Can’t I do these things myself?  That is a common question, and the answer is, of course, with the proper information and understanding.  But planners and counselors offer advantages, each in their respective fields.  They have expertise that saves a great amount of time.  They have experience and perspective in helping clients.  They understand immediate life-changing events and how clients can best respond.  And most of all, they aren’t emotionally involved, as clients often are, so their advice is objective.

Choosing a Counselor or Planner

Not all counselors or planners are alike!  Make sure to interview the prospective counselor carefully.  Is this person a fit for you?  Do they treat you with respect?  Are they trained and/or certified? Are the members of the local Better Business Bureau?  Do they explain the process by which they will guide you?  It is appropriate to interview several advisors before selecting the one that best suits your needs.

For more information on Financial Counseling or Financial Planning, refer to the following resources:

Dave Ramsey (http://www.daveramsey.com)

The Association for Financial Counseling and Planning Education (http://afpce.org). 

The Wisdom Journal (http://thewisdomjournal.com)

Certified Financial Planner Board of Standards (http://www.cfp.net)

Financial Planning Association (http://www.fpanet.org)

Texas Tech University, Division of Personal Financial Planning (http://www.depts.ttu.edu/pfp)