What is a Financial Planner?

What Is a Financial Planner? 

A financial planner works with their clients to help them manage their current money needs and reach their long-term financial goals. They advise and assist clients on a variety of matters, from investing and saving for retirement to funding a university education or a new business while preserving wealth.  A financial planner needs a thorough knowledge of personal finance, taxes, budgeting, and investing. They may specialise in tax planning, asset allocation, risk management, retirement or estate planning. They typically draw their clients from a specific population (young professionals or retirees).

What Do Financial Planners Do?

Their focus may be broad or narrow. Some financial planners help clients with many aspects of their financial lives, including savings, investments, insurance, retirement savings, college savings, taxes, and estate planning. Others have a much narrower focus such as retirement or estate planning.

Some financial planners sell investments, insurance, and other financial products. Others help their clients create an investing plan and leave the clients to make the specific decisions.

What Is the Difference Between a Financial Planner and a Financial Advisor?

Every financial planner is a financial advisor, but not every financial advisor is a financial planner. A financial planner helps clients (individuals, families, and businesses) create programs to reach their long-term financial goals. They may offer broad financial advice or specialise in an area such as investments, taxes, retirement, or estate planning.

On the other hand, “financial advisor” is a broad term that refers to nearly any professional who advises people on their finances, including certified financial planners. They may help manage their clients’ money, manage investments, buy and sell stocks and funds on the client’s behalf, and help with estate and tax planning.

Understanding the Role of a Financial Planner 

The Certified Financial Planner Board of Standards (CFP Board) describes financial planning as “a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.”

Financial planners are considered fiduciaries. This means they are legally bound to act in a client’s best interests and can’t accept payments from any third parties when recommending specific financial products to clients. If they do, this is a conflict of interest and must be remedied promptly.

Choosing the Right Financial Planner 

It’s a very good idea to interview at least three financial planners so you can choose the one who is best for you. It is okay to comparison shop, and it is equally important to record your answers to the following questions:

• What are their credentials?
• Can they provide references?
• What (and how) do you charge?
• What is their area of expertise?
• Will they act as my fiduciary?
• What services can I expect?
• How will we settle disputes?

The CFP® Designation 

The most commonly held professional designation is certified financial planner (CFP®), issued by the CFP Board, the non-profit certifying and standards-setting organisation that administers the CFP exam. Certified financial planner is a designation awarded to individuals who successfully complete the CFP® Board’s initial exams, then engage in ongoing annual education programs to maintain their skills and certification. To check the status of a CFP®, visit the CFP Board website. Some financial planners hold the “CFP®” designation to establish their professional qualifications.

If you are thinking about engaging a financial planner, it is imperative that you select a financial partner who is qualified, experienced and committed to your success. This is especially relevant when you consider different people have differing goals so ideally investments should be tailor-made for yourself and your needs. There is no sense making a financial plan based on retirement if you are only in your thirties for example. A good financial planner will get to know you, assess how much risk you are comfortable with, keep you informed, and help you achieve your goals. There are many financial planners available but you should select the one you feel most comfortable with as the best fit gives you ease of mind and drives your investment value higher.