Money Mentor vs. Financial Planner vs. Financial Advisor: Which is Best?

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Posted On: January 17, 2023

The new year brings a unique chance to change your future and financial situation. According to a recent survey by intelliflo, a cloud-based technology platform for financial advisors, 71% of Gen Z (ages 18-25) and 72% of Millennials (ages 26-41) say they want financial advice but don't know how to get it.

There are tons of financial gurus out there. Some are legit, but too many others might not be. There are also different types of those providing financial advice: money mentors, financial planners, and financial advisors. Wondering what the difference is between them all? We've got you covered. We'll discuss each below to help you decide the best fit.

Money Mentor

A money mentor knows the basics of personal finance, such as budgeting, saving, building wealth, retirement planning, and even basic investing. They also know how to successfully put their knowledge into practice, which is evident in their life and lifestyle.

Additionally, a money mentor is a part mentor and part teacher. In other words, the chosen person will be eager to share their knowledge and experiences. And since a mentor is setting aside their time to help you, it's essential that you be a good mentee in return. Remember, you've chosen your money mentor because they inspire you, and you feel their advice is sound. Therefore, make sure you're putting their advice and guidance into practice.

Ideally, the money mentor you choose should have real-life experiences, including successes and past failures, some of which you might be experiencing in your present situation. With this first-hand knowledge, they can guide you on what worked for them and what did not.

When considering a money mentor, look for someone a step or two above where you are now and who is succeeding with their finances. Some money mentors charge a fee for their time, while others do not. However, look at more than just the cost; also consider the mentor, their experiences and background, and what you'll gain from the mentorship.

Financial Planner

While a money mentor is a great place to start, sometimes you need more advice and a more detailed and personalized plan. For this, consider a financial planner.

Financial planners are professionals with even more finance knowledge. They can help you strategize and create a plan to meet your financial goals in areas such as:

Budgeting and Saving
Investing
Insurance
Retirement Planning
Taxes
Estate planning

Many financial planners specialize in one or more of these areas. So, always ask before you choose whom to work with.

Unlike most money mentors, financial planners often carry professional designations like Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA). These designations mean they have taken professional courses, demonstrated knowledge, skills, and experience, and passed a board certification exam through an accredited college or university. So, they know their stuff.

Financial Advisor

You don't need to be wealthy to hire a financial advisor; they help everyone. However, you should know what they do to gauge whether you need their services or would be better supported by a financial planner or money mentor.

A financial advisor is a highly skilled professional. Like financial planners, they often carry the same professional designations, such as CFP and CFA, along with Chartered Financial Consultant (ChFC) and Chartered Wealth Manager (CWM). Sometimes they also specialize in one or more areas, such as insurance, investments, etc.

Like a money mentor and a financial planner, a financial advisor is your partner in helping you reach your money goals. However, not all financial advisors offer the same service, so ask questions and shop around before deciding whom to hire.

Some advisors offer limited services and guidance, allowing you to do more, like managing your investments. Others offer a full range of services and can address tasks like portfolio rebalancing for you.

It's important to ask how your advisor receives pay regarding commissions and fees; this also differs from one advisor to the next, resulting in two classifications of financial advisors: fiduciary and non-fiduciary. Here's what you should know about each.

Fiduciary Advisors

Always places your interests before theirs
Not permitted to accept commissions from investment sales
Generally, charge a flat fee for services, which can be monthly or annually

Non-Fiduciary Advisors

Required only to sell those products suitable for your needs
Products they sell might cost more or might not be the best match for your interests
Often works on commissions for selling specific investment products

These are not red flags since both classes of financial advisors can help you achieve your money goals. But it is wise always to ask how commissions and fees will impact the financial advisor's earnings before you hire them.

Here are some common services advisors can help you with.

Budgeting and Saving
Managing Debt
Saving for College
Investment Advice
Tax Planning
Retirement Planning
Long-Term Care Planning
Estate Planning

The Final Word

The right source for sound, personalized financial advice is straightforward if you know where to start looking—understanding the differences between mentors, planners, and advisors and what type of financial advice you need is a great place to start. You can find more information on financial planning on our website.

Sources

Money Mentor vs. Financial Planner vs. Financial Advisor: Which is Best?

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