The Key Difference Between Financial Advisors and Financial Counselors

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 carry different certifications and often fulfill different roles, complementing each other’s work. Both positions take on many of the same responsibilities and share many similar duties, but the key difference between them lies in their education and training.

Unraveling the Financial Alphabet Soup

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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, to advance in the field and become competitive in the job market, professionals oftentimes need to pursue further training, generally working toward certifications. Those who want to focus on financial advising typically 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. To become certified as a financial counselor, individuals must complete 1,000 hours of experience in a financial counseling role, while becoming an advisor only 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 Financial Certification Really Brings 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, individuals must choose a designation—Certified Credit Counselor or Financial Health Counselor— and become an active member of the National Association of Certified Credit Counselors, or the NACCC.

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. If you’re looking for professional guidance, it’s helpful to know the difference between the two. If you get confused, it may help you 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.

Hi! I’m Holly, the founder of Financial Impact and an award-winning financial coach. I help career-driven leaders and entrepreneurs create wealth, take the stress out of managing money, and feel confident and powerful when it comes to their finances.

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