A financial planner can help you manage your money with an emphasis on your long-term goals, like retirement or paying off debts. Financial planners help their clients formulate a customized plan for meeting their objectives. Financial planners are just one type of financial advisor, along with wealth managers, financial consultants and more.
If you want to connect with financial advisors who serve your area, try SmartAsset’s free advisor matching tool.
What Is a Financial Planner?
Financial planners receive certification from accredited institutions and commit to regular training and ethical guidelines. They can be individuals who offer one-on-one or virtual meetings. Basic planning may also come from robo-advisors. Each option provides different services, but the core function is helping clients develop a comprehensive financial plan.
These professionals may hold one or more certifications. Some are chartered financial consultants (ChFC) while others are Certified Financial Planner™ (CFP®), a group that is discussed in more detail below. Other financial planners are retirement income certified professional (RICP). Professionals in adjacent fields, such as certified public accountants (CPAs) or chartered financial analysts (CFAs), may also offer financial planning services.
What Does a Financial Planner Do?
Some of a financial planner’s duties might include:
- Analyzing your budget and spending habits to find areas where you could trim expenses.
- Helping you create a strategy to build both short- and long-term savings.
- Reviewing your retirement goals and helping you build your savings plan appropriately to reach those goals.
- Offering advice on how best to save and pay for college.
- Discussing the various steps of estate planning and creating a financial legacy for your heirs.
- Offering guidance on how to best make use of life insurance or annuity products.
- Helping you fine-tune your tax strategy.
- Helping you to create an exit plan if you own a business.
Regardless of what a financial planner does, their overall purpose is helping you get from Point A to Point B with your finances. This is slightly different than what a financial advisor does. An advisor’s job, broadly speaking, is to help you manage your money. So, for example, your advisor might offer investment advice on which stocks or mutual funds to add to your portfolio.
Do I Need a Financial Planner?
Preparing ahead of time for retirement or other major financial goals can seem daunting. A personalized financial plan can make it easier to manage finances through life’s stages.
With the internet being more prevalent than ever, there are a number of DIY options for making your own financial plan. In fact, there are plenty of free and paid financial planning programs, tools and literary resources available today. If you’re comfortable planning on your own, DIY tools may work. However, financial planners offer value by integrating your needs into a cohesive strategy based on their experience.
Most financial planners specialize in specific types of planning, so it’s important that you pick one who’s aligned with your goals. This could include topics like estate planning, tax planning, retirement planning, college fund planning and more.
In addition, financial planners often double as investment advisors. So if you need help investing, a financial planner could be an “all-in-one” solution to all of your financial needs.
What Fees Do Financial Planners Charge?
One of the most important things to keep in mind when hiring any financial professional is how much you’ll pay for their services. There’s no one standard rate scale that financial planners follow. Depending on the scope of the services a planner offers and whether or not they’re certified, they might charge:
- A percentage of the assets under management (AUM)
- An hourly fee
- A flat fee for one-time consultations or standalone projects
- A quarterly or annual retainer fee
The 2024 Kitces Report lists the median hourly rate for financial planning at $300. A standard financial plan costs $3,000, while more comprehensive plans average $3,500.
For ongoing services, many planners charge based on assets under management (AUM), typically around 1% annually for portfolios under $1 million, with lower percentages for larger accounts. In fact, 92% of advisory teams use AUM fees and seven out of 10 advisors bundle the cost of financial planning into these fees. The report also notes that asset-based fees typically range from 1.15% to 0.63%.
Fee structures can vary widely based on the planner’s experience, services offered, and client demographics. Some planners blend multiple fee types—for instance, charging an upfront planning fee with ongoing AUM-based management.
Fee-Only vs. Fee-Based
If you’re shopping for a financial planner, be sure to ask whether they’re fee-only or fee-based. Fee-only financial planners only receive fees from the clients they serve; they don’t get any commissions or income in relation to the products they sell, such as mutual funds or annuities.
A fee-based financial planner, on the other hand, does profit directly from the sale of certain investment products. Understanding the difference can help you avoid potential conflicts of interest, since a fee-only financial planner isn’t obligated to suggest or recommend a particular investment with the goal of earning a commission.
Certified Financial Planner (CFP) Designation
Some financial planners may hold a Certified Financial Planner™ (CFP®) designation. By working with a CFP® professional, you ensure that you’re working with a professional who’s been through a rigorous training program.
To become a CFP®, a financial planner must complete the certification process through the CFP Board. There are four key requirements for a CFP® certification:
- Education: Financial planners must complete a college-level program of study in personal financial planning, including a financial plan development capstone course registered with the CFP Board. They must also have a bachelor’s degree or higher from an accredited college or university.
- Exam: Financial planners must complete an exam as part of the CFP® program. This exam is broken up into two three-hour sessions, and it covers topics like investment planning, tax planning, estate planning and professional rules of conduct.
- Experience: The CFP Board also expects financial planners to have real-world experience. Candidates for the CFP® designation must have at least 6,000 hours of experience through the Standard Pathway or 4,000 hours of experience through an Apprenticeship Pathway.
- Ethics: Financial planners who hope to become certified must agree to follow the standards of ethics and practice outlined in the CFP Board’s code of conduct. Financial planners must also disclose relevant background information any criminal and civil complaints or regulatory actions against them.
The main difference between a CFP® and a non-certified planner lies in the designation’s training and ethical requirements. If you’re working with a financial planner that’s certified, that automatically tells you that they’ve been through the rigorous education and testing process required by the CFP Board. As a result, they adhere to a higher ethical standard and code of conduct.
In terms of the services a CFP® can provide versus a financial planner without the designation, there may be a little difference or a lot. A CFP®, for example, may continue offering comprehensive planning services or they may choose to specialize in one particular area, such as retirement or estate planning.
Bottom Line
When comparing financial planners, it’s important to do your research. Ask questions about the range of services they provide and the kind of clients they typically help. If you’re a millennial needing guidance on retirement planning, for example, you might want someone who works with retirees. The more you know about a financial planner before you commit, the better chance you’ll find one who meets your needs.
Financial Planning Tips
- If you need help building a financial plan, but don’t know where to turn, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Be sure to research a financial planner’s fee structure before you sign any formal agreements. This way, you’ll have an idea of what kinds of fees you’ll be on the hook for. You should also ask whether they are fee-based or fee-only. This will determine if they can earn third-party commissions or not.
- With each financial planner you research, check their credentials. Look to see if they hold a Certified Financial Planner™ (CFP®) designation or any others. You can also use FINRA’s BrokerCheck tool to research a planner’s background and check for any disciplinary or legal issues.
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