Understanding Financial Planners
Let me explain what a financial planner does: they help you manage your money and hit those long-term financial goals you've set.
As a financial planner, my role is to guide you in better managing your finances and reaching objectives like paying off debt, saving for retirement, investing for education, protecting against risks, minimizing taxes, or handling estate distribution. The term 'financial planner' gets thrown around for various jobs in finance, but the most trustworthy ones are certified financial planners (CFPs), a title awarded by an independent board.
With all the designations and acronyms out there in financial services, it's no wonder you might get confused by terms that sound alike, as Scott Bishop points out—he's got CPA, PFS, CFP after his name at Presidio Wealth Partners in Houston. CFPs primarily advise individuals, though some work with small business owners too, covering retirement planning, investing, and other financial areas.
You can find financial planners working independently or at firms, banks, wealth management companies, or nonprofits. They might handle all parts of personal finance or specialize in certain areas. While most have solid education and experience, there's no universal minimum to call yourself a financial planner.
Key Takeaways
Remember, a financial planner is there to help you manage money and achieve long-term goals. Many cover all aspects of personal finances, but some focus narrower. A lot of them, especially CFPs, are fiduciaries bound to act in your best interests. To become a CFP, you need to meet tough requirements in education, exams, experience, and ethics. Fees differ—you might pay fixed, hourly, a percentage of assets, or via commissions.
What Financial Planners Do
The Certified Financial Planner Board of Standards defines financial planning as a collaborative process that maximizes your potential to meet life goals through advice integrating your personal and financial situations. That collaboration matters—I'm not here to dictate, but to partner with you as a trusted pro to reach your goals.
Many planners like me assist with all personal finance aspects, though some narrow it down. But we all plan finances in some way. As CFPs, we're often fiduciaries, legally required to prioritize your interests.
When you're looking for a planner, expect an initial meeting— in person or virtual—where we discuss your finances, goals, risk tolerance, and I explain my services, how I can help, and my fees. This first one is usually free, and it's key to see if we click.
If you move forward, I'll create a comprehensive plan for your needs and work with you to implement it. Follow-ups could be regular or as needed, by phone or in person. It all depends on what arrangement suits you—don't feel pressured; there are plenty of good CFPs out there to match your needs and budget.
Tip for Your First Meeting
Don't hold back in that initial meeting—ask about my credentials, expertise, fees, services, and any potential conflicts of interest.
Financial Planner Fees
Fees for financial planners vary based on experience, the job, and other factors. Billing methods aren't standardized—you could pay hourly, by project, by assets under management (AUM), or through commissions.
Often, we charge a percentage of managed assets, say 0.5% to 2%, depending on services, amount managed, and more. This can add up long-term, but we usually lower the rate as your AUM grows. It aligns interests: better performance means more pay for me.
For consultations or short projects, hourly rates apply, typically $120 to $300 based on experience.
Flat fees offer transparency for one-off tasks like debt plans, or even quarterly for ongoing work, varying by complexity.
Some planners are commission-based, paid by companies for selling products like funds or insurance. It's cheaper for you upfront, but watch for incentives that might not favor you.
Types of Financial Planners
Financial planners differ in key ways, starting with qualifications. You usually need some credentials, though state laws vary. Licenses are often required for advising or selling products. Some do the minimum, but the top is the CFP designation.
To get CFP status, you need a bachelor's degree, specific financial planning coursework, 6,000 hours of experience (or 4,000 in apprenticeship), pass a 170-question exam on 100 topics, and commit to ethics putting clients first. To stay certified, complete 30 hours of education every two years.
Planners are paid as fee-only (just from clients), fee-based (clients plus some commissions), or commission-based (from product sellers). Commission-based might push products for higher pay, though they're bound to suit you. Fee-only minimizes conflicts, making them preferable for most.
You can check if someone is a CFP via the board's lookup tool.
Think of planners like doctors: some specialize (e.g., investing or insurance), others handle everything from investments to taxes and estate planning. Specialists might excel in their niche, but firms often have teams covering all bases.
The Bottom Line
You turn to a financial planner for managing money and long-term goals, but we're not all identical. Qualifications, expertise, and fees vary widely. Some cover full personal finance, others specialize. The best have top credentials and always recommend what's best for you.
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