What Does a Financial Planner Do?

Financial planners help clients plan for future financial needs, grow net worth, minimize taxes, set up budgets and more. Depending on how wealthy one is, who one's financial planner is, and where one goes to find financial planning assistance can all affect what a financial planner does. Financial planners can include a wide range of professional, educational and experiential milieus that focus on different tiers of wealth, life stage financial planning, investment goals etc.

The advice received from different financial planners should be consistent in terms of some financial practices, but may also vary depending on what financial products the financial planner is promoting, the financial planner's experience and knowledge, and the unique objectives of the client-planner relationship.

The best financial planning services may include, but not be limited to all the following attributes, however this is not to say that all financial planners with such attributes may be the most suitable financial planners for all financial planning scenarios. This article will discuss financial planning in terms of 1) an example of what a financial planner does, 2) types of financial planners, 3) financial planning services, and 4) attributes to look for in a financial planning service.

Financial planning example

Sometimes a financial planner can help one not make a bad financial decision. For example, before cashing out a large sum of retirement funds to invest in a condominium, consider the tax consequences of withdrawing such a large sum of money on annual income. If the retirement funds withdrew are $250,000.00 and the retiree was in the 25% tax bracket the year before, that individuals income for the year could quite possibly rise into the 35% tax bracket making the tax on the retirement funds $25,000. Good financial planners can help with decisions like these to avoid unnecessary costs and consequences of financial decisions.

In addition to assisting with costs and consequences of financial decisions, a financial planner can help one achieve one's own financial goals. That is to say, the interest of the client should be more important than whatever financial products the financial planner may be trying to sell. Some financial planners may not sell any products and simply help one re-organize one's finances for improved cost savings, greater income retention, wealth creation, retirement planning etc. A few of the key areas a well-rounded financial planner may be able to help with are the following:

• Retirement Planning
• Wealth Building
• Budget planning
• Cost management
• Insurance needs
• Taxation issues

Types of financial planning

As noted above, many types of financial planners exist, each of which may have a different specialty. Knowing which planner is most useful for which situation can be helpful in case of specific financial concerns. Financial planners may or may not hold professional certifications and/or licenses depending on what their career objectives and requirements are. Many such financial certifications and licenses exist, a few of which are listed below as sourced from the Certified Financial Planner Board of Standards, Inc.

i) Certifications:

• Chartered Property Casualty Underwriter (CPCU)
• Chartered Retirement Planning Counselor (CRPC)
• Certified Pension Consultant (CPC)
• Chartered Mutual Fund Counselor (CMFC)

ii) Licensure:

• Certified Public Accountant (CPA)
• Licensed Realtor
• Securities Licensed
• Licensed Insurance Underwriter

Financial planning services

Not everyone needs or should need a financial planner as finances aren't always that complicated. If an individual or household has relatively few expenses, little or no debt and a steady income and are fiscally savvy, a financial planner may be of little or no assistance. However, the perspective of a financial planner may enhance or improve the know how of peers in the industry as well as financial professionals, and thus may be worth hearing out in specific aspects of financial planning.

To illustrate the above point, a mortgage broker can generally be thought to have a good sense of money, however a financial planner may know more about insurance products than the mortgage broker and if the mortgage broker is need of insurance, the advice of the financial planner may be beneficial or helpful. Other areas of specialized knowledge where financial planners may be of use are the following:

• Brokerage services
• Tax management techniques
• Investment planning
• Income dispersal strategies
• Estate planning
• Insurance assessment
• Life stage financial goals

Positive attributes of a financial planner's services

When deciding whether or not a financial planner is worth while a few things might be worth considering beforehand. Specifically, is the decision to make use of a financial planner's services a financially sound decision in the first place. Hiring a financial planner may be less cost effective than not hiring one and only if the benefits outweigh the costs should a financial planner be used financially speaking.

However, in some cases it may take a financial planner to know whether or not one actually needs a financial planner. The following tips may help in the decision of whether or not to choose a financial planner and things that might be worth thinking about after that decision is made.

• Consider commissions and products: Commissions and products may have the potential to affect a financial planners assessment of a financial situation and the financial tools they recommend. Financial planners that work for specific companies may be obligated to promote those products so inquiring if the products are actually helpful is a good idea.

• Costs: Determine hidden costs, surcharges, maintenance fees, commissions and any other fees associated with financial products recommended by a financial planner.

• Expertise: Financial planners with specific areas of expertise may be more helpful in certain situations than financial planners with a broad range of knowledge. For example, some financial situations, such as specific tax strategies may benefit more from in depth and sophisticated knowledge associated with tax accountants.

• Self-Reliance: Look first to one's own abilities and skills before deciding whether or not help is needed. Sometimes, all that is needed to solve a complicated financial situation can be solved with a few common sense principles, organization and forward thinking.

• Different Financial Planning Services: Choosing the right financial planner may be beneficial. One does not generally need a stock broker to help with debt management issues or an Insurance underwriter to solve tax problems. Sometimes a simple sliding-scale financial planner may be all that is required if that.

Financial planners should ideally be experienced, knowledgeable and skilled with money management concerns in addition to being aware of client's unique situations and communicate possible solutions for each situation. A financial planner should benefit clients more than they cost them, otherwise the cost of utilizing a financial planner is financially unsound.

Depending on who a financial planner works for, where they are located and what their area of expertise is can and does influence the type of advice, products and commissions associated with that advice. For this reason it is important to first identify one's own financial goals when making the decision of which financial planner is most worthwhile.

Sources:

1. http://www.fpanet.org/ http://www.cfp.net/downloads/RenewalCE1_06.pdf
2.http://www.cfp.net/