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Paying someone to manage your money seems like an oxymoron, but sometimes it’s the best decision you can make.
If making large financial decisions overwhelms you or you worry you aren’t making the right choices, it might be time to get an objective opinion.
A financial planner can help steer you in the right direction if you are learning how to invest, plan for retirement, or need general guidance on allocating your financial resources.
What is a Financial Planner?
A financial planner is a financial professional who helps you make sense of your finances. He/she can help you assess your current financial situation and plan your future financials.
Financial planners aren’t a one-size-fits-all approach. Some financial planners focus on investments, others on taxes, and some focus on helping clients make sense of their current finances, including getting out of debt.
What Does a Financial Planner Do?
No matter your reason for using a financial planner, they all work as fiduciaries. They operate in your best interest and not to secure higher commissions for themselves.
They help you get from where you’re at to where you want to be financially by setting goals and the steps to reach them.
A few common examples include:
- Saving for retirement
- Saving for college
- Buying a house
- Minimizing your tax liability
- Planning your estate
Types of Financial Planners:
Robo-advisors are automated advisors. A computer system creates a portfolio based on your inputs and manages it for you. You pay a small fee (usually 0.25% of assets under management) for the service and get a hands-off approach to investing without paying high commission fees.
Robo-advisors have low minimum deposit requirements, making it easy for anyone to invest. Most robo-advisors offer taxable and retirement account options.
#2. Online Financial Planning Services
Online financial planning services are a hybrid between a robo-advisor and human advisor. You get the benefit of lower fees but with access to a human advisor as needed.
Usually, the robo-advisor does the portfolio planning and managing, but the human advisor tweaks the portfolio based on your conversations.
#3. Facet Wealth
Facet Wealth is an innovative financial company that is on a relentless mission to democratize financial planning.
They will pair you with a dedicated CFP Professional, tailor their services to meet your needs, and will help you establish clear goals. The best part about Facet Wealth is that it is actually affordable.
#4. Local Financial Planners
Local financial planners are your traditional financial planners. You visit a financial planner in person (usually), talk about your financial situation, short-term, and long-term goals, and create a financial plan.
Fees are much higher for financial planners, but you get the ‘human touch’ when creating and managing your portfolio.
Certified Financial Planner (CFP) Designation
If you have a complex situation or want an advisor with extensive education, the CFP may be right for you. CFPs go through much more testing and have more regulations than standard financial planners. CFPs specialize in estate planning, financial planning, taxes, insurance, and retirement.
Benefits of Financial Planners
- Licensed Experts: Your money is your greatest asset. You shouldn’t let just anyone help you manage it. Using a licensed expert provides peace of mind. You’ll know the expert must operate in your best interests and should make wise choices for your money.
- Tailored Guidance: Handling your investments, retirement accounts, and planning your estate can be overwhelming. Working with a licensed expert, you get the advice of a trained professional who can help you set goals and the steps to reach them.
- Low Stress: Dealing with your finances yourself can be too much. If you make a big mistake, it can cost you and your family your financial security. Dealing with a financial planner, you’ll have the benefit of expert guidance, helping you make decisions that give you peace of mind.
How Much Do Financial Planners Cost?
Like any service, always know what they charge before you agree to use their services. Financial planners charge for their services, but usually in different ways:
- Percentage of assets under management
- Flat fee
- Per hour
- Quarterly fee
Is a Financial Planner Worth it?
You don’t have to be ‘rich’ to use a financial planner. It may make sense for anyone who wants an objective opinion on their financial strategies or at least consult with a financial planner.
If nothing else, it’s another opinion about what you should invest in and what steps you should take to reach your financial goals.
Related: How to Research Stocks
Is it Safe to Work with a Financial Planner?
It’s generally safe to work with a financial planner, but always do your due diligence. Check out their credentials before using them and interview any financial professional before you hand over your financial information.
Ask any financial planner about their expertise, the type of client they work with, how they’ll create your financial plan, and how they’ll communicate it with you.
Gauge how you feel when talking to the financial planner and for more reassurance, check out their credentials on the CFP Board of Standards website if you choose a CFP.
Bottom Line: What is a Financial Planner?
If you don’t know how to manage your finances or feel like you aren’t making the right decisions, consult with a financial planner.
You have many options from a robo-advisor to a full-fledged CFP and everything in between. Think about your goals, what you can spend, and how much help you want with your financial goals before choosing one.
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