Financial Advisors vs Financial Planners guide updated 2022

Financial Advisory Services

The right response to complex corporate financial decisions

Businesses are regularly presented with complex financial situations and decisions. Some of these situations present valuable opportunities, such as acquisitions or expansions, while others require you to protect yourself in litigation matters or financial disputes. How you respond to these demands is a major determining factor in the success of your business. Organizations facing demanding financial decisions and situations often require expertise that's outside the realm of their internal resources—resources that may already be stretched thin.

RSM’s financial advisory services team specializes in helping organizations manage major transitions and accounting issues, while mitigating threats that can pose significant risks. We apply our professional experience, competencies and methodologies to navigate complex corporate financial situations smoothly and with minimal disruption to the organization. Through effective process management and continual communication, we allow businesses to stay focused on activities that maximize value. Our deep knowledge of the corporate financial landscape and our experience in a variety of industries allow us to provide objective advice for your complex challenges.

Financial advisory market

The financial advisory segment is estimated to be worth $67 billion, roughly a quarter of the global consulting market. Unlike other segments within the consulting industry, throughout the crisis years and its aftermath, financial advisory continued to perform relatively stable, driven by three key factors. During the economic woes, the demand for crisis & turnaround management grew strongly, while not much later the demand for accounting advisory services and risk management took off, particularly in the financial services sector. In the slipstream of the recovering economy, the M&A market has rebounded strongly, driving demand in corporate finance and transaction services. These three services combined more than offset the (large) drop in demand in other financial advisory fields, across the board spurring an upwards trend in the overall market.

Financial advisory services

The market for financial advisory consists of eight main disciplines: Transaction Services, Corporate Finance, Crisis & Recovery, Risk Management, Accounting Advisory, Tax Advisory, Real Estate Advisory and Forensics & Litigation. Transaction services provides client with a range of services related to the acquisition, merger or divestiture of an organisation. Services range from setting an M&A strategy, target screening, valuations and due diligence in the pre-deal process to post-merger integration support and other operational transaction services after a deal has been unveiled. Corporate finance is the area of consulting that deals with funding and capital structure matters. Key propositions include financing (including alternative investments) restructuring, working capital management (also closely tied to the finance consulting segment within operations consulting), IPO’s and capital markets.

When companies find themselves in financial difficulties, they commonly turn to crisis & recovery advisors. Experts support them with getting a grip on the crisis situation (short term) and subsequently ensuring a turnaround plan is in place for the longer term. Key services include insolvency (or bankruptcy) management (consultants are often called in as administrators), restructuring, turnaround advisory and debt management. Risk management consultants help organisations with ensuring that uncertainty in the enterprise and market does not impact (or minimally) business goals. Main offerings are, among others, risk management (analyzing risks and ensuring a process and governance is in place to mitigate risks), risk control (setting up the right warning systems that can detect risks), internal audit (assessments aimed at mapping risk profiles and compliance) and IT risk; which covers the growing risks in the information technology arena, such as cybersecurity, digital governance and enterprise data management. The tax advisory segment centres around helping enterprises adhere with tax law, which includes propositions such as corporate tax strategy, location advisory, transfer pricing and tax aligned supply chains. Accounting advisory focuses on supporting clients with optimising the accounting and financial reporting challenges facing their businesses and the finance function. Projects typically entail boosting the efficiency of the accounting function, improving financial reporting quality and flows, and ensuring compliance to regulatory requirements at all levels, such as International Financial Reporting Standards (IFRS) globally and local legislation.

What does a financial advisory consultant do?

Unlike the other four consulting segments, the main disciplines within Financial Advisory are less related from a functional perspective – the grouping is based on the dependency on financial skills and competences, in many cases combined with analytical rigour. As a consequence, the disciplines can, to a large extent, be seen as separate service areas: a corporate finance or M&A consultant, for example, performs substantially different activities than a risk expert, while a forensics engagement entails complete different activities compared to property valuation project. In addition, a share of financial advisory services overlaps with other consulting segments and even non-consulting services. For instance, corporate finance and M&A services are also offered by strategy consultants and investment bankers, while litigation & forensic services also are part of the service portfolio of (specialised) law firms. Typically, the financial side of compensation & benefits – part of the HR consulting segment – also falls within the scope of financial advisory, in particular pensions and healthcare consulting.

Financial advisory firms

Traditionally the market for financial advisory is dominated by firms with a legacy in tax and audit services, such as the large accounting- and consulting firms. Yet, over the past years, firms from other segments, such as strategy consultants, process specialists, economic experts and systems integrators have developed their footprint in the financial advisory landscape. As a result of the variety of services within financial advisory, each discipline tends to have a relatively large group of different players, such as corporate finance boutiques, real estate experts or risk management specialists.

Understanding Financial Advisors

Financial advisor is a generic term with no precise industry definition. As a result, this title can describe many different types of financial professionals. Stockbrokers, insurance agents, tax preparers, investment managers, and financial planners can all be considered financial advisors. Estate planners and bankers may also fall under this umbrella.

The Fiduciary Distinction

Since the enactment of the Investment Adviser Act of 1940, two types of relationships have existed between financial intermediaries and their clients. These are the reasonableness standard and the stricter fiduciary standard. These relationships characterize the nature of the transactions between registered representatives and clients in the broker-dealer space. There is a fiduciary relationship that requires advisors registered with the Securities and Exchange Commission (SEC) as Registered Investment Advisors to exercise duties of loyalty, care, and full disclosure in their interactions with clients.

Financial Advisors vs. Financial Planners

The financial planner is one particular type of financial advisor who specializes in helping companies and individuals create a program to meet long-term financial goals.

A financial planner might have a specialty in investments, taxes, retirement, and/or estate planning. Further, the financial planner may hold various licenses or designations, such as Certified Financial Planner (CFP) designation. Financial planners may specialize in tax planning, asset allocation, risk management, retirement planning, and/or estate planning.

Courtesy: best financial advisory in australia