Financial Planner: Definition, What Financial Planners Do and How to Find One

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You’ve got financial questions. The internet’s got answers. So do friends, family members and TikTok influencers.

Financial planners can cut through the noise and provide expert money advice that’s tailored specifically to your needs.

A financial planner is a professional who takes inventory of your finances, then creates a plan to help you meet your current financial needs and long-term goals. That typically means assessing your financial situation, understanding what you want your money to do for you (both now and in the future) and helping create a plan to get you there.

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What does a financial planner do?

Financial planners help their clients meet their money goals, whether that’s investing, saving for retirement, paying for college or something else. Financial planners can help you reduce spending, pay off debt, and save and invest for the future.

But financial pros are like doctors: Some are specialists in defined areas, such as taxes or investments. Others, like certified financial planners, are general practitioners, offering advice on budgeting, investing, insurance, retirement planning and more.

When you work with a CFP or an online planning service, you’ll begin with a review of where you stand. You’ll be asked about:

  • Your goals. What are your short- and long-term financial priorities?

  • Your current financial picture. How much money comes in and goes out? What do you own, and what do you owe?

  • Your risk tolerance. This series of questions about how queasy stock market gyrations make you informs how much of your portfolio should be in stocks versus other investments like bonds.

An initial meeting with a financial planner is like a first date: It’s the chance to get to know one another and see if you mesh on a personal and philosophical level. Take this opportunity to find out everything you can, including how much you can expect to pay, how the financial plan will be presented and how often to expect ongoing communication. (Here are 10 questions to ask a financial advisor to gather information and see whether you click.)

You can expect any financial planner to be in fairly regular contact with you, though the form that contact takes will vary. Robo-advisors typically send regular emails and account prompts while online planning services and traditional planners will meet with you throughout the year. You should update your planner with any changes to your financial situation.

Do I need a financial planner?

Generally speaking, the more complex your financial situation, the more likely you are to benefit from a financial planner.

If your finances are simple, you may be able to take a DIY approach. But financial planners can provide an objective perspective, and bring expertise to decisions about how you should invest your money, what your financial priorities should be and what sort of insurance coverage and other protections you need. A financial planner can be especially helpful when you’re faced with a life change — think marriage, a divorce or an inheritance.

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Types of financial planners

The type of financial planner that is best for you will depend on your needs, life stage and budget. We’ll outline a few options below.

Robo-advisors

If you’re just starting out, a robo-advisor may be enough to meet your needs. Automation has enabled traditional firms such as Vanguard and Fidelity, as well as online-only companies like Betterment and Wealthfront, to substantially lower the price of portfolio management. These companies are ideal if you need investment management, but not holistic financial planning.

Robo-advisors build and manage a portfolio of low-cost investments suited to your financial goal for a small fee — many top choices charge 0.25% or less of your account balance. The investment mix is determined by a computer algorithm and is automatically adjusted when needed. At the basic account level, you can start investing with $100 or even less.

The low-cost, easy-entry nature of robo-advisors reduces barriers to working toward your financial goals. That’s important because avoiding the market can starve your retirement. You can start with a robo-advisor and add a human advisor later on if needed.

Traditional, in-person financial planners

For those with complicated or ongoing planning needs, a traditional, in-person financial planner may be a better fit. A CFP can provide holistic, one-on-one advice for the most complex financial situations. The official CFP designation indicates that a provider has gone through a rigorous formal training and testing process.

A fee-only CFP typically charges by the hour (usually $200 to $400) or by the task (a flat $1,000 to $3,000 fee, for example). Some might charge based on the size of the investment portfolio they are managing for you; this is called an assets-under-management fee and is typically 1% of your portfolio balance per year. The initial consultation to discuss your needs and their services is usually free.

Before you enter a relationship, ask whether the person you’re considering is a fiduciary, a term that means they’re obligated to put the client’s best interests first. (Members of the National Association of Personal Financial Advisors, for example, fill both the fiduciary and fee-only requirements.)

Online financial planning services

There are several online planning services that combine computer-driven portfolio management with access to living, breathing financial planners. In many cases, you’ll get a dedicated financial planner and a comprehensive financial plan, but you’ll meet with that advisor via phone or video conference rather than in person.

Online planning services like this typically charge more than a robo-advisor but less than a traditional financial planner. Examples of companies in this space include Facet Wealth and Empower.

Online financial planners like robo-advisors or online planning services often offer virtual tours, demos and even the chance to test-drive the investment platform before you sign up. With an online planning service, you may be able to meet with your dedicated financial planner before deciding to sign on.

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Financial planner vs. financial advisor

A financial planner is a type of financial advisor who typically focuses on offering holistic financial guidance in addition to services such as investment management. For example, financial planners can help you answer questions like, “How do I save for retirement and my child’s college fund at the same time?”

How to find a financial planner

There are a few factors to consider when shopping for a financial planner, such as credentials, disciplinary history and specialization.

Credentials

People often use the terms “financial planner” and “CFP” interchangeably, but that’s not always accurate. The term “financial planner” is unregulated. Anyone can call themselves one, regardless of their training, credentials or duties. Not all financial planners are required to act as fiduciaries to their clients.

The CFP designation, on the other hand, is regulated by the Certified Financial Planner Board of Standards. Only financial professionals who have satisfied the board’s educational, exam, work-experience and ethical requirements may use it. CFPs must act as fiduciaries to their clients to maintain the designation.

You can verify whether or not a financial planner is a CFP using the Certified Financial Planner Board of Standards’ CFP lookup tool.

Disciplinary history

That same lookup tool will also show you whether a financial planner has ever received any formal complaints, or if they’ve ever had any legal or disciplinary actions taken against them by the court system or the board. It’s worth being cautious about engaging a financial planner who has a history of wrongdoing.

Specialization

Some financial planners specialize in a particular type of client. Some of these specialized planners obtain specialized credentials (potentially in addition to a CFP).

For example, Chartered Special Needs Consultant (ChSNC) is a designation that indicates expertise in offering financial planning services to people with disabilities and their families. It is offered and regulated by the American College of Financial Services.

When you’re considering working with a particular financial planner, it’s a good idea to look up the meaning of any abbreviations or credentials after their name, to see if their specializations are a good fit for your financial situation.

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