Magazines, books, newsletters, television programs, conferences, seminars and websites on the subject abound. And maybe that’s the problem. When it comes to personal financial planning, you face information overload. Sorting it all out is time consuming, confusing and risky. What sounds like a good investment one week can prove to be a disaster the next. It is the job of a financial advisor to sift through sometimes-conflicting advice and help you make choices that will have a positive impact on your financial future.
Video: Certified Financial Planners
What does a financial planner do?
Among other things, a financial planner should do the following:
Help you define and set goals.
Introduce you to investment options that may help you reach those goals.
Inform you of the risks of these options and determine your comfort level.
Help you with paperwork when making specific investments.
Stay in touch with you and make changes as needed.
The advisor will develop a plan that suits your desires and needs. Such a plan can include providing an education for your children, ensuring a comfortable retirement and caring for loved ones after your death.
When do you need a financial planner?
Some financial planners recommend that you strike up a relationship with one almost as soon as you begin earning an income. A teenager working part time to save for college probably doesn’t need a financial advisor yet, but as earnings and responsibilities rise, so does the need for professional financial help. Choosing a planner takes time and effort. At least one university offers a course in the basics of financial planning to help consumers better understand the process.
How do they differ?
Not all people who refer to themselves as financial planners have the needed skills. A professional designation provides some assurance that the individual offers the required level of education and expertise.
Certified Financial Planners (CFPs) must pass an exam prepared by the CFP Board of Standards, which shows that they have experience in investment, taxation, retirement and estate planning. Two years of coursework and three years of planning experience is the prerequisite for the certification.
Chartered Financial Consultants (ChFCs) are certified by the non-profit American College. Coursework and a series of exams are required.
Certified Public Accountants (CPAs) have obtained a college degree, passed an examination and earned a state license.
Personal Financial Specialist (PFS) is a CPA who has passed a test administered by the American Institute of Certified Public Accountants and has at least three years of financial planning experience.
Registered Financial Consultant (RFC) must have a federal securities license and a state insurance license.
Video: What a Financial Planner Does
How do they get paid?
There are three ways a financial planner makes money: fee only, commission only and a combination of those two.
Fee-only planners charge a fee up front but don't take commissions on any investment products you might purchase. Their fees may be hourly, monthly, quarterly or yearly, based on a percentage of the money they manage. One advantage of hiring this type of planner is that you can expect to receive unbiased advice.
Commission based planners do not charge an upfront fee for planning services but make a commission on whatever products they sell you. Therefore it is in this type of planner’s interest to promote products such as annuities, mutual funds, life insurance and other investments.
Combination planners charge a fee for the planning plus commission on products sold.
Don’t hesitate to ask a planner to explain how he or she is paid. Whatever type you choose, be sure that you’re completely comfortable with him or her. Absolute trust in his or her commitment to helping build your financial wealth is crucial. The partnership could last from your first paycheck to your last, and beyond.
Financial planning firms
Beck Financial Strategies
5825 North Post Rd.
Indianapolis, IN 46216
BG Financial Planning
669 Main St., Ste. 6
Wakefield, MA 01880
Integrated Financial Strategies
8 Star Lane
Amesbury, MA 01913-5507