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What Is a Financial Planner, and What Do They Do?


A financial planner can help you manage your money with an emphasis on your long-term goals, like retirement or paying off debts. In order to achieve this, a financial planner will 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 are trained professionals who have received a certification from a reputable institution and who commit to periodic training and a certain ethical standard. They can be individuals who offer one-on-one or virtual meetings. In some cases basic financial planning can be offered by robo-advisors. All these offer a variety of services but it comes down to one thing: helping clients create a comprehensive financial plan.

These professionals may come with one or more of various certifications. Some are chartered financial consultants (ChFC) while others are certified financial planners (CFP), a group that is discussed in more detail below. Other financial planners are retirement income certified professional (RICP). Financial planning can also be done by specialists in adjacent fields, like certified public accountant and chartered financial analyst.

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. Having a financial plan in place that was personally created for you as you move through the stages of life can make things easier, though.

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. So if you’re comfortable with planning on your own, those could be suitable choices. Financial planners still hold quite a bit of value, though, due to their past experiences with other clients and their ability to holistically incorporate all of your needs into a single plan.

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?

What Is a Financial Planner, and What Do They Do?

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
  • An hourly fee
  • A flat fee for one-time consultations
  • A quarterly or annual retainer fee

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 same 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.

Besides fee-based and fee-only financial planning, there is subscription-based financial planning. That’s the approach of FacetWealth, for example, which charges an annual fee that ranges from approximately $2,000 to several thousand dollars more. One of the appeals of such an approach is that the cost is consistent. Another appeal is the assurance that you won’t have to deal with any sales pitches.

Certified Financial Planner (CFP) Designation

Some financial planners may hold a certified financial planner (CFP) designation. By working with a CFP planner, you ensure that you’re working with a professional who’s been through a rigorous training program.

A financial planner can earn the title of CFP by completing a 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 key difference between a financial planner that has a CFP designation and one that doesn’t is the designation itself and what that involves. 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

What Is a Financial Planner, and What Do They Do?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 change you’ll one who meets your needs.

Financial Planning Tips

  • If you need help building a financial plan for you and your family, but don’t know where to turn, a financial advisor’s insights and guidance can make a world of difference for you. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one 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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