What is a Financial Planner? Benefits, What to Look For & How They Can Help You Achieve Your Goals

Introduction

A financial planner is a professional who helps individuals and businesses create and manage their financial plans. They are often referred to as Certified Financial Planners (CFPs). Financial planners provide advice on a wide range of topics including investments, tax planning, retirement planning, estate planning, insurance, and more. By working with a financial planner, you can develop a comprehensive plan that will help you meet your long-term financial goals.

Benefits of Working With a Financial Planner

Working with a financial planner can offer many advantages over managing your finances yourself. Here are some of the key benefits:

Expertise in Investing

Financial planners have the knowledge and experience to make informed decisions about investments. They can help you identify which investments are right for you, based on your risk tolerance, time horizon, and financial goals. According to a survey by the Financial Planning Association, 84% of investors who worked with a financial planner said they felt more confident in their investment decisions.

Access to Resources

Financial planners have access to a wide range of resources that can help you make informed decisions about your finances. They can provide access to research and data, as well as tools such as budgeting software and investment calculators. This can be especially helpful if you’re just starting out with investing or don’t have the time to do the research yourself.

Guidance and Support

Having a financial planner on your side can help keep you accountable and motivated to reach your goals. They can provide guidance and support during times of doubt or confusion, and help you stay focused on your long-term objectives. A study by the CFP Board found that 86% of those who worked with a financial planner felt they had made progress toward achieving their financial goals.

What to Look for When Choosing a Financial Planner

When it comes to selecting a financial planner, there are several factors to consider. Here are some important things to look for:

Education, Certifications and Licenses

It’s important to make sure the financial planner you choose has the necessary education and credentials. The most widely recognized certification is the CFP designation, which requires passing an exam and completing specific coursework. Additionally, some states require financial planners to have a license, so be sure to check with your state’s licensing board.

Experience

Be sure to ask potential financial planners about their experience. Ask how long they’ve been in the industry and what types of clients they typically work with. It’s also a good idea to ask for references from past clients. This can give you an idea of how satisfied other clients were with the planner’s services.

Communication Style

It’s important to feel comfortable communicating with your financial planner. Be sure to ask how they prefer to communicate, whether it’s via phone, email, or in person. It’s also a good idea to ask how often they’ll provide updates on your progress and how quickly they respond to questions.

How Financial Planners Can Help You Achieve Your Goals

Financial planners can help you reach your financial goals in a number of ways. Here are some of the key services they provide:

Developing a Comprehensive Financial Plan

Financial planners can help you develop a comprehensive plan for reaching your financial goals. This includes analyzing your current financial situation, setting short-term and long-term goals, and creating a strategy for achieving them. They can also help you prepare for unexpected events, such as job loss or illness.

Managing Investments

Financial planners can provide guidance on how to invest your money. They can help you determine which investments are best suited for your risk tolerance and financial goals. They can also monitor your investments and make adjustments as needed to ensure you’re on track to reach your goals.

Tax Planning

Financial planners can help you minimize your tax liability by taking advantage of available deductions and credits. They can also provide guidance on tax-advantaged investments and strategies for reducing your tax burden.

An Introduction to the Different Types of Financial Planners

There are three main types of financial planners: fee-only, fee-based, and commission-based. Here’s a brief overview of each type:

Fee-Only Financial Planners

Fee-only financial planners are paid solely by their clients, usually through hourly fees or flat fees. They do not receive any commissions or other forms of compensation from third parties. This makes them a good option for those who want to avoid conflicts of interest.

Fee-Based Financial Planners

Fee-based financial planners charge a combination of fees and commissions. They may receive payments from third parties, such as mutual fund companies or insurance companies. This can be beneficial if you need access to certain products or services.

Commission-Based Financial Planners

Commission-based financial planners are compensated solely by commissions. They may receive payments from third parties, such as mutual fund companies or insurance companies. This can be a good option if you’re looking for a low-cost option.

The Pros and Cons of Hiring a Financial Planner

Hiring a financial planner can be beneficial, but it’s important to understand the pros and cons before making a decision. Here are some of the key advantages and disadvantages:

Advantages

Some of the key advantages of working with a financial planner include access to expert advice, guidance and support, and access to resources. A financial planner can also help you create a comprehensive plan for achieving your financial goals.

Disadvantages

The main disadvantage of working with a financial planner is the cost. Depending on the type of planner you choose, you may be charged an hourly rate, a flat fee, or a percentage of assets managed. Additionally, some financial planners may have conflicts of interest, so it’s important to make sure you choose one who is independent and unbiased.

Understanding the Cost of Working With a Financial Planner

The cost of working with a financial planner varies depending on the type of planner you choose. Here’s a closer look at the different fee structures:

Hourly Rates

Many fee-only financial planners charge an hourly rate for their services. These rates can range from $100-$300 per hour, depending on the planner’s experience and location. This can be a good option if you only need occasional advice or help with specific tasks.

Flat Fees

Flat fees are typically charged by fee-only financial planners for developing comprehensive financial plans. These fees can range from $1,000-$4,000, depending on the complexity of the plan. This can be a good option if you need help developing a comprehensive plan.

Percentage Fees

Some fee-based and commission-based financial planners charge a percentage of assets managed. These fees can range from 1%-2% of assets managed. This can be a good option if you need help managing your investments.

Conclusion

Working with a financial planner can be a great way to reach your financial goals. They can provide expertise, guidance, and access to resources that can help you make informed decisions about your finances. Before choosing a financial planner, it’s important to do your research and make sure they have the necessary credentials, experience, and communication style that fits your needs. Understanding the different types of financial planners and their associated costs is also important to ensure you’re getting the best value for your money.