What happens when you visit a pharmacy and ask a medicine for fever, the chemist gives you a pill (which is without a prescription). If the pill works, you visit him again for other health issues to get another pill. By doing so you are avoiding a visit to the doctor, saving on prescription fees and escaping travel costs. It seems like a quick solution to the problem but It’s like putting carpet on dirt without cleaning it so that it looks clean. The actual illness could be something else which you would not have known by then. This way of dealing things may be useful in the short run but does not solve the greater purpose of understanding one’s own health condition.
Similarly if you wish to invest your savings, you go to a bank/broker house/ friend or a relative who is selling financial products and invest in what is being offered by them without assessing your own financial health nor consulting a financial planner. Although, the Financial Planner and Financial Advisor are similar by the book but in India a Financial Advisor is none other than a person selling financial products. Although a Financial Planner also advises products, it is supported by a process of understanding one’s financial situation, cash flows, goals etc.
The only argument which settles the debate between the Financial Planner or an Advisor is that an advisor does “Product based sales” and a Financial Planner does “Advise based sales”. This does not make a Financial advisor inferior but an investor needs to understand the difference between the two and then take an informed decision.
|Financial Planner||Financial Advisor|
|Specializes in various aspects of personal finances||Specializes in financial products|
|Assesses risk appetite of the investor and recommends financial products based on the risk profile||More or less choose the product from the available bucket of products and advise the investor|
|Does Risk Management, Cash flow management, Investment planning, goal planning and tax planning||Covers only a fraction of investment planning|
Apart from the above a financial planner abides to Board’s code of ethics and conduct, the fiduciary duty that a financial planner takes up to work is always in the best interest of the client without any bias, where as the financial advisor lacks the same.
Even if you look at the key difference in the design principle of the two professionals. A planner by nature is a pessimist, therefore expects and plans for undesirable eventualities in all 3 – personal, financial & market spaces. An advisor is an optimist, betting on his/her understanding of the market and no fallback for undesirable/unfavorable conditions.