Financial Planners Help Get Your Financial Life In Order (2024)

A financial planner can help you chart a course for your financial life. From budgeting and saving, to managing taxes and leaving a legacy for your children, these money experts share their expertise so you can get your personal finances in order.

What Is a Financial Planner?

A financial planner is a professional who works with clients to manage their financial affairs, develop financial goals and create strategies to achieve those goals. Financial planners offer expertise and guidance for budgeting, investing, retirement, tax planning, insurance and estate planning.

The primary role of a financial planner is to help people assess their current financial situation, understand their goals, and develop a comprehensive financial plan tailored to their specific needs and circ*mstances. This involves gathering financial information, analyzing it and formulating strategies to improve their financial well-being.

What Does a Financial Planner Do?

When you hire a financial planner, they help you understand your financial goals and you a plan to meet them. Financial planning goals include things like buying new home, investing money for retirement, setting aside funds for your children’s education or deciding which insurance products you need.

Financial planners may perform a wide range of tasks, including:

• Setting goals. Their main job is to help you identify you short-term and long-term financial goals—buying a home, saving for retirement, funding education or starting a business—and make a plan to achieve those goals.
• Financial analysis. As part of the goal-setting process, they review your financial information—income, expenses, assets and liabilities—to evaluate your financial health and identify areas for improvement.
• Retirement planning.Retirement is a key goal for everyone, and financial planners will help you determine how much you need to save in your401(k) plan, IRAs and other retirement accounts.
• Investment advice. You’ll need to invest money to achieve most of your financial goals—especially retirement—so planners advise you on investment options and asset allocation based on your risk tolerance and time horizon.
• Insurance planning. Understanding how much insurance you need can be big challenge for most people. Financial planners have the expertise to ensure you get the coverage you need.
• Taxes. Nobody likes doing taxes, and financial planners can optimize your tax strategies: maximize deductions, manage investments for tax efficiency and help you understanding the tax implications of different financial decisions.
• Estate planning. Preparing an estate plan that includes a will, trusts and powers of attorney ensures the orderly transfer your assets with minimal taxes after you pass away.

A financial planner analyzes every aspect of your situation, deploying their expertise and insight to help you optimize your budget and spending to achieve all of your goals.

Financial Planner vs. Financial Advisor

The terms financial planner and financial advisor are often used somewhat interchangeably. In fact, both types of professional offer financial planning services that help clients reach their financial goals.

Financial advisors, however, are generally considered to be a much broader category. They are professionals who manage your investments, arrange insurance coverage and act as your stock broker—in addition to offering financial planning services. Financial planners limit themselves to more targeted services.

Types of Financial Planner

It’s important to note that “financial planner” itself is an unregulated umbrella term. Anyone can call themselves a financial planner and offer financial planning services. Some may specialize in certain aspects of planning, like retirement or tax management, while others take a more holistic approach.

Fiduciary Financial Planners

A fiduciary financial planner is required to act in their client’s best interest. The term fiduciary duty means that a planner is bound to put their client’s financial interests before their own.

In practical terms, a fiduciary financial planner must offer their clients the best possible solutions at the lowest price point, no matter what fees or commissions the planner earns—from the client or other sources.

Some financial planners are only held to a suitability standard. Under a suitability standard, a financial planner or advisor’s recommendations must meet your needs, but they are permitted to recommend products or services that charge you higher fees or earn them higher commissions than similar products might.

When choosing a financial planner, the best policy is always to choose a fiduciary so you know the products and services they recommend are best for you, not them.

Certified Financial Planners

Certified financial planner (CFP) is an industry credential with rigorous educational and ethical requirements that fully prepares advisors to provide comprehensive financial planning services.

Notably, all CFPs must act as fiduciaries, and most work on a fee-only basis, meaning they’ll only be compensated by you, not by the products they suggest. Because of their thorough training and fiduciary standard, CFPs are mainstays of the financial planning community—and where many clients choose to start their financial planning journey.

Investment Advisers

Investment advisers—spelled with an “e” because that’s how the law applying to these financial planners spells it—are individuals or companies that assist clients with buying and selling securities and may provide financial advice.

There are two main types, chiefly differentiated by whether they adhere to a suitability standard or a fiduciary standard:

• Registered representatives. Registered representatives buy and sell securities on behalf of their clients and are usually licensed through the brokerage firms that employ them. With many registered representatives, you make the decisions, and the representative simply carries them out. However, some advertise themselves as financial advisors or planners. If you choose to work with a registered representative who is providing financial advice, keep in mind that they are only held to a suitability standard, which may impact the products and services they recommend to you.
• Investment adviser representatives. IARs are employed by companies called egistered investment advisors, which are firms that provide financial advice and planning services. Unlike registered representatives, IARs are held to the fiduciary standard. Many may have additional credentials, like CFPs, to enhance their financial planning abilities.

Robo-Advisors

Robo-advisors provide automated investment management. Most place you in a pre-built investment portfolio based on your goals and willingness to take on risk that they’ll then manage and maintain for you over time.

Robo-advisors are technically RIAs, meaning they’re also held to a fiduciary standard, and increasingly many are complementing their automated offerings with more comprehensive financial planning provided by human planners and CFPs. If you’re a beginner investor who might only occasionally need the services of a financial planner, this hybrid approach could be a good fit.

Wealth Managers

In practice, wealth managers are financial planners for high-net-worth individuals. Due to the clientele they work with, they typically specialize in aspects of financial planning more commonly affecting the wealthy, like estate planning, legal planning and risk management to preserve assets.

As with the term financial planner, wealth manager is not regulated, meaning anyone, regardless of credentials, can call themselves a wealth manager. This means only some wealth managers, but not all, are fiduciaries.

How Much Does a Financial Planner Cost?

The cost of hiring a financial planner can vary widely depending on their experience, credentials, location and the complexity of your financial situation.

Some financial planners charge an hourly rate for their services. Hourly rates can range from around $100 to $400 or more, depending on the planner’s expertise and location. The total cost will depend on the number of hours spent on your financial plan or specific consultations.

Financial planners may offer flat fees for specific services or a comprehensive financial plan. Fees for the latter can range up to several thousand dollars. The cost will depend on the complexity of your financial situation and the depth of analysis and recommendations required.

For a longer-term relationship, planners may charge a percentage of assets under management. This fee structure typically applies to investment management services, where the planner actively manages your portfolio.

Average financial advisor fee rates are listed in the table below, broken down by fee type:

Do You Need a Financial Planner?

While most everyone could benefit from the services of a financial planner, the truth is not everyone may need one. If your finances are fairly simple—meaning you are working, have some money in savings and are tucking money away into a retirement account—you may not need a financial planner.

However, a financial planner can help you if your finances are more complex or if your situation changes, such as if:

• You receive a significant windfall. If you come into a sudden influx of cash—such as a large bonus from work or inheritance after a loved one passes away—a financial planner will work with you to develop a plan for the money to ensure you can reach your goals.
• Your income changes. If you get a new job that changes your income substantially, a financial planner can help you create a new budget and adjust your retirement contributions.
• You are getting married. If you are getting married, you and your future spouse might meet with a financial planner to discuss how to handle existing debt, save for a new home or plan for children in the future.
• You are getting divorced. Financial planners can also help you deal with difficult situations, like divorce. By working with a financial planner that specializes in divorces, you can get assistance with determining child support and alimony, dividing up personal property and understanding tax laws.
• A new child is coming to the family. If you are expecting or are planning to adopt, a financial planner can help you decide what type of life insurance policies you need and how to save for your child’s college education.

How to Choose a Financial Planner

If you decide working with a financial planner is the right move for you, there are a few things you’ll want to look for:

Credentials

Because anyone can call themselves a financial planner, it’s wise to look for credentials that are highly respected, like:

• CFP: A certified financial planner is well equipped to help you plan out every aspect of your financial life. If you’re looking for general help getting on top of your finances, a CFP is a great place to start as they all must meet intense requirements and act as fiduciaries for their clients.
• CPA: A certified public accountant specializes in tax planning and is licensed within their state. If you’re looking for help managing your taxable income or decreasing what you owe come tax time, you may want to turn to a CPA.
• CFA: A chartered financial analyst can act as a financial planner, though most choose to work helping companies manage their finances, rather than individual consumers. That said, if you encounter a CFA offering financial planning services, take heart that they’ve passed many rigorous industry exams and have years of work experience qualifying them for that credential.

Fiduciary Duty

If you aren’t a financial professional yourself, you probably aren’t familiar with the ins and outs of most financial products and their associated tax codes. That’s why it’s invaluable to have an expert guide you through the process who has only your financial best interests at heart.

Unfortunately, not all financial planners are fiduciaries. Some only offer advice on products they sell, such as certain investments or insurance accounts, and may guide you toward products that will earn them higher commissions. Be sure to ask any prospective financial planners if they’re a fiduciary so you know whether they’re looking out for your bottom line—or theirs.

Typical Clientele

Even general CFPs may specialize in specific types of clients, like doctors, lawyers, or those with high amounts of student loan debt. Ask potential financial planners about the kinds of people they typically work with and the kinds of services they tend to provide. This way you can make sure you choose a professional with extensive experience dealing with the kinds of financial issues you yourself face.

Formal Complaints

Unfortunately, not every financial planner is a good actor. Before you enter into a relationship with a financial planner, who will have access to confidential financial information, check their credentials and disciplinary history on BrokerCheck. If they’ve had any complaints filed against them, those could be red flags.