What Is a Financial Planner?

Are personal finances becoming a bit too much to handle? Consider hiring a qualified financial planner to get your money on track toward your long-term goals. Whether it’s planning for retirement, taxes, your estate, or handling investments, one can help.

In this article, we’ll explain how a planner can help you take control of your financial situation. You’ll learn what they do and when you need one. Finally, we’ll break down how much one costs and where you can find one.

What a Financial Planner Does

Financial planners are professionals that help you create a comprehensive plan for your finances in the present and for the future. In the short term, they may work with you to budget, save more, and make the right investments. For the future, they may guide you toward retirement and setting up an estate. Whatever it is, their objective is to help you take your money where you want it to go.

A typical financial planner’s job can encompass many aspects of your finances. Some may only specialize in one or more areas. While others, such as CFPs, offer a wider range of services. 

Depending on your needs, a qualified planner can help you with the following:

Cash Flow Planning

For both long and short term goals, a financial planner will work with you to manage cash flow. This ensures you’re saving more than you’re spending. Typically, this means assessing your lifestyle, creating a budget, and minimizing debt. Once completed, you’ll likely have more funds to invest into appreciating and cash-generating assets.

Estate Planning

It’s never a bad idea to establish an estate plan. With an expert, you can develop an estate that properly handles your finances in the event of your incapacitation or death. Often, this means assisting you with how your assets will be distributed or conserved, as well as avoiding unnecessary taxes.

Investment Planning and Management

Help with investments should be included in services offered by a professional financial expert. They could be longer term, like real estate, or shorter, such as stocks or bonds.

No matter which type of investment you’re interested in, a planner can help you make more informed decisions.

Retirement Planning

Being able to retire comfortably is a key element of financial planning. A qualified expert can guide you toward retirement by utilizing:

• Social security
• IRAs
• 401(k)s
• Annuities

Risk Management

Without risk management in place, unforeseen circumstances could devastate your finances. A financial planner can work with you to ensure you minimize investment risks and have proper insurance to prevent preventable losses.

Tax Planning

Taxes can be ridiculously hard to understand. And even if you have a grasp on the subject, it’s difficult to know whether you’re doing them in the most advantageous way. A tax expert can explain what you need to do to file correctly, as well as identify deductions to help you save money. 

Certified Financial Planners (CFPs)

All legitimate planners should have professional training. But some have the “certified financial planner” (CFP) designation. These are individuals who have passed an exam and received a valid certificate from the CFP Board.

To receive a CFP designation, a person must complete an education requirement. During their schooling they’ll have gained expertise in financial planning, taxes, investments, retirement, estates, and insurance.

Potential CFPs must also gain either 6,000 hours of professional experience or 4,000 hours of apprenticeship experience. Finally, CFPs must agree to act as fiduciaries, which are advisors that put their client’s needs above their own at all times.

When you hire a CFP, you know you’re getting someone with a high ethical standard and a wide range of expertise. The designation cements their credibility and indicates a level of trustworthiness.

When You Should Hire a Financial Planner

Financial planners are useful for nearly everyone. However, if your monetary situation is easy to manage, you may not need to hire a pro. But if you’re struggling to manage your assets or have a relatively high net worth, we recommend hiring one.

If you fit into one of the following categories, you may want to seek out an expert to help you with your money:

• You’re a high net-worth individual. More money often means more wealth to manage. A financial planner can help you with common challenges, such as your investment portfolio, estate planning, and taxes.
• You own a business. Owning a business can be extraordinarily complex from a financial perspective. An expert can help you properly pay your taxes, plan for retirement, and have an exit strategy.
• You require an estate. Estate planning often requires an expert. A professional planner can make sure your assets are handled according to your wishes.
• You aren’t comfortable handling your own taxes. If taxes aren’t your forte, a planner can help you file correctly and potentially save you money in the process.
• You just had a big life event. Significant life changes, such as marriage, divorce, and windfalls all could use an expert’s touch. Connecting with one can ease your mind and ensure you’re in the best possible monetary situation.

Austin Scott, a CFP with Pinnacle Ascent Wealth Management in Washington state, weighs in on when you should hire a planner, “Financial planners can help clients at many different stages in their life, whether that is starting good investing disciplines at a young age or setting up the right estate plan later in life to make the right choices for your loved ones. Everyone should have a financial plan in place, some may have more complex situations than others, but checking on your strategy and growth at least annually should be a minimum, similar to an annual doctors visit or dentist visits to make sure everything is on track and maximizing the growth towards your goals.”

How Much One Costs

The pricing for a financial planner can vary, depending on who you hire and what services you need. In general, there are two structures they use to charge clients:

Fee-Only

Fee-only planners charge either based on the task(s) they’re providing or by the hour. According to a study by AdvisoryHQ, a financial advisor can charge anywhere from $120 to $300 an hour. Or, if the rate is based on a task or project, you can expect to pay around $275 for something like college planning or up to $4,500 for a more comprehensive plan.

Commission-Based

Commission-based planners make money through financial transactions or when you buy products that they recommend to you. With a commission-based advisor, it’s harder to know whether there’s bias or a conflict of interest, in terms of what products or investments they recommend.

How to Find a Financial Planner

The key to finding the right financial planner is selecting one that can effectively help you with your needs. Before you select one, you should consider the following:

• Qualifications. Be sure to verify the person’s credentials. For instance, you should check to see if they’re a CFP. You may also want to ask for references or real customer testimonials.
• Are they a fiduciary? Working with someone who follows the fiduciary standard means they’ll always put your needs above others. If they’re a CFP, they’ve agreed to do so. Otherwise, you may want to verify this.
• Expertise. Some planners don’t focus on all aspects of personal finance. Be sure you’re hiring someone that matches your objectives.
• Price. It’s always a clever idea to compare prices between a few options. At times, paying more could get you a higher quality product. But there may also be a better deal out there for a similar result. Be sure to weigh your choices carefully before settling.

If you need a head start in your search, this free tool can instantly match you with several vetted financial planners in your area. Once you have a handful of matches, you can close in on your pick with the criteria above.

Frequently Asked Questions

What is a fee-only financial planner?

A fee-only advisor charges on a per-hour or per-project basis, rather than a commission. Fiduciaries are often fee-only because they have no personal incentive (such as a commission) to steer you toward certain products or investments.

What is a commission-based financial expert?

Commission-based professionals make money when you buy products or investments that they recommend to you. These types of planners don’t follow the fiduciary standard, where your needs are the top priority. We recommend using caution when you hire a commission-based advisor. Conflicts of interest may keep them from offering the best advice for you.

What are fiduciaries?

Fiduciaries agree to follow a standard of ethics that always puts their client’s needs ahead of their own. These are typically CFPs and fee-only planners or advisors.

What is the difference between a financial planner and an advisor?

Both are remarkably similar, but they aren’t exactly alike. Advising is a general term that refers to the practice of assisting one with their finances, including planning. On the other hand, a planner is an awfully specific type of financial advisor. These are people who help you create a comprehensive plan in the long- and short-term based on your goals.

When you begin your search for a financial planner, you may see individuals advertise themselves as advisors. If this is the case, they’re able to help you with your planning needs. However, just be sure that they have the proper expertise for the project you want to hire them for, such as tax or estate planning.

Is hiring a planner worth it?

The answer to this question depends entirely on your situation. If you’re struggling to manage your money or have worries about the future, you should visit with a financial planner to get on track. However, if you’re perfectly comfortable with taking care of your finances, you may not need one right now.