I’m not so sure of that. After the fall of Numenor, where Sauron’s physical form is destroyed, it’s stated that he could no longer assume a form fair to men’s eyes. This suggests first that he used to be able to do so, and second, that he might still be able to assume various foul forms. The Maiar are certainly less powerful than the Valar, but I’m not sure what, if anything, is the qualitative difference between them.
To further amplify on the heirerarchy:
When Gandalf mentions the Secret Flame, that’s an aspect of Eru Iluvatar, and is what gives a thing “reality”. Roughly analogous to the Holy Spirit.
Elbereth Gilthoniel, about whom the Elves sing, is also one of the Valar, as is Orome, who’s mentioned in passing in the books.
The Maiar mentioned in the Lord of the Rings are the Five Wizards (Saruman, Gandalf, and Radagast by name, plus a reference to “the staves of the Five Wizards”, so we know there are two more), Sauron, and the Balrog. In addition, the personifications of the Sun and Moon are Maiar (the Sun is female and the Moon male in Tolkien’s mythos), as is Melian, distant ancestress to both Aragorn and Elrond. Collectively, the Valar and the Maiar are called the Ainur, and they all existed before the World began.
Then there are also the fey, beings which are a part of the World, and are a sort of incarnation of some aspect of Creation. Ungoliant, mother of Shelob, was a huge spider that was the essense of Darkness, and Tom Bombadil’s wife Goldberry, the river’s daughter, is probably also in this category. If you consider the mountain Caradhas as a malevolent being, it’s probably fey as well. There aren’t too many fey in anny of the later works, but they show up a lot in the Lost Tales.
Tom Bombadil might arguably be in any of the above categories, but I personally think that he’s in a category all his own. There’s little to no evidence one way or the other.
And then there are Elves and Men, the Children of Iluvatar, and Dwarves, the Adopted Children. Hobbits are actually a subset of Men.
Back to the Wizards. Perhaps the best way to understand the relationship between Gandalf and Saruman is that Gandalf the White is what Saruman was supposed to be in the first place. Gandalf even says as much in the book: “You might say that I am Saruman, Saruman as he was meant to be” (from memory).
As for Gandalf’s use of magic, in The Hobbit, he does use some flashy magic when the party is ambushed by Goblins (= Orcs) while crossing the mountains. We’re not sure exactly what he did, but it was a flash of light that killed all the goblins around him. But that was after all fourteen of his comrades had been kidnapped while they slept, and a large number of goblins were going after him alone. In the book of Lord of the Rings, the fight with the goblins in Moria was much less serious: They didn’t meet any orcs until they were in the room that they shut the door on them, and they were able to keep most of them out. They only outnumbered the party by two or three to one, as I recall, which isn’t much for goblins, so swords were good enough. So I guess what I’m saying is that Gandalf doesn’t use magic unless he needs to.