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The Key Difference Between Financial Advisors and Financial Counselors

Updated: December 21, 2021

When it comes to seeking financial advice, you want to make sure you’re going to the professional who best fits your needs. There are so many sub-fields in the financial industry, and so much professional overlap, that it’s hard to know where to go.

The two most commonly confused financial experts are Financial Advisors and Financial Counselors. While the terms “advisor” and “counselor” are often used interchangeably, they differ primarily in education and training. In addition, they:

  • Carry different certifications
  • Often fulfill different roles
  • Frequently complement each other’s work

At a high level, it can help to think of it this way:  financial advisors are trained to help you manage and grow your assets, while financial counselors are trained to help you get to a place where you can create assets.

Let’s explore further.

Unraveling the Financial Alphabet Soup

If an individual would like to pursue a career in the financial industry, he or she needs to hold a minimum of an associate’s degree in a finance-related field to qualify for an entry-level position. An individual with a bachelor’s degree in finance can assume the title of “financial advisor.”

However, most people choose to grow their careers over time. Therefore, those who want to focus on financial advising typically go on to enroll in programs that work toward one of many certifications, the gold standard of which (and the one most frequently confused with financial counseling) is the Certified Financial Planner (CFP) certification.

Individuals wishing to become financial counselors enroll in Accredited Financial Counselor (AFC) certification programs.

Achievement of both CFP and AFC certifications require professionals to gain expert knowledge in such areas as tax law, risk management, investment planning, and so forth, as well as to garner years of industry-related experience and uphold codes of ethics.

Counseling certifications, though, have more stringent experience requirements than their advising-certification counterparts. For example:

  • To become certified as a financial counselor, individuals must complete 1,000 hours of experience in a financial counseling role
  • To become a financial advisor requires three years of experience in any industry related to financial planning.
 

While this gives advisors more room for exploration and a broader sense of the industry, it can potentially lead to less precise training than counselors attain.

What Does Financial Certification Really Bring to the Table?

In terms of certification coursework, both CFP and AFC candidates share material regarding retirement and estate planning, life and property/casualty insurance, stocks, bonds and mutual funds, taxation, debt management, budgeting, and cash-flow management.

However, the two paths deviate when it comes to consumer debt, consumer fraud and credit reports, debt-reduction strategies, divorce-related issues, and bankruptcy, mortgages, and student loans—all of which financial counselors hone in on much more so than advisors.

Additionally, to gain an AFC® designation, which is offered through the Association for Financial Counseling and Planning Education®, individuals must complete 1000 hours of relevant experience along with employment verification. The Accredited Financial Counselor® certification is considered one of the most rigorous and thorough programs in the industry.

The CFP training curriculum gears financial advisors for careers in working with a much more financially stable population than financial counselors do. Advisors generally work with a wealthier clientele, and so their education is typically more heavily weighted in investment and estate planning.

Conversely, those pursuing their financial-counseling certificates are required to possess effective counseling and communication skills, in addition to their financial training, because their field caters much more to the lower and middle market.

Financial Advisors vs. Counselors: Why It Matters

When nearly 70% of Americans are living from paycheck to paycheck and 40% are in credit card debt, discussing personal finance is often an extremely emotional subject for the client and has to be dealt with sensitively for the counselor to make any impact. This often also translates into financial counselors having more experience in providing guidance and teaching services related to bankruptcy, improving credit scores, getting out of debt, and adjusting to the financial demands of new homeownership, new marriages, new babies, and recent divorces.

So, while both financial advisors and financial counselors are experts in the field, their certificate training creates fundamental differences in their career emphases.

author avatar
Holly Morphew AFC®, Award–winning financial coach, author, global speaker, and multi-generational entrepreneur
Holly’s own journey to eliminating $67k in debt in her twenties, reaching financial independence in her thirties, and creating 11 streams of income are what inspire her to help others live their wealthy life.
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