What does a financial planner do?

The services provided by an individual financial planner vary. Depending on their qualifications, experience, licenses, and expertise, they might sell stocks, mutual funds, or insurance products, or they might simply provide advice to their customers. Some limit their advice and services to specific subjects, focusing on one or two areas of expertise, such as taxes, investing, or estate planning.

In general, a financial planner won’t actually handle all the work you need to have done in particular investment areas. Instead, he or she will help you coordinate your individual needs with your accountant, insurance agent, or other specialists.

When choosing a financial planner, it’s important to find out exactly what services an individual provides and does not provide, to be sure they’ll give you the assistance and advice you’re looking for. You also might want to check into certifications—is the financial planner a CPA, a Retirement Planning Counselor, a Certified Financial Planner, etc? Depending on their focus, they may or may not have the expertise you need for your particular situation.

Video: How to Choose a Financial Advisor

How does a financial planner make money?

Financial planners make money in a variety of ways. Some charge a flat fee, while some receive commissions based on the financial products they sell. Still others charge based on your personal assets. That is, they charge you a percentage of the assets you’ve invested with them. In addition, some financial planners are compensated with a combination of flat fees and commissions.

You should know up front how a prospective financial planner is compensated. While you can always hope that a financial planner will make recommendations honestly based on your needs, there’s always the possibility that they might push one financial product over another because their commissions will be better. If this is a concern, you might want to look for a financial planner who charges a flat fee, as this arrangement reduces the risk of any conflict of interest.

What are the different types of financial planners?

There are several different types of financial planners. These designations are based on the type of education and certifications the individual planner has achieved.

These certifications include:

• Certified Financial Planner (CFP®)—A CFP can offer a wide variety of financial planning advice. A financial planner with a CFP designation has at least three years of experience, and has passed specific exams to receive the designation. In addition, CFPs are expected to follow an ethics code.
• Chartered Financial Consultant (ChFC)—A ChFC is usually an insurance specialist who has met additional education requirements.
• Certified Public Accountant (CPA)—CPAs are typically used for tax issues. Primarily an accountant, a CPA will have met specific licensing and education requirements, but won’t necessarily have training in financial planning.
• Personal Financial Specialist (PFS)—After additional training in financial planning, and meeting certain other experience requirements, a CPA can be certified as a PFS.
• Chartered Retirement Planning Counselor (CRPC)—These planners focus on retirement planning.

While this list represents some of the major designations used by financial planners, there are over fifty designations in all. Some planners even have more than one designation.

Who needs a financial planner?

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You don’t have to be inordinately wealthy to benefit from the services of a financial planner. If you have any amount of income you can use for investments, or if you have specific savings goal, such as saving for college, retirement, or to buy a house, you can benefit from a financial planner. In fact, almost anyone can benefit from a financial planner, if only to help organize your budget, savings, or other aspects of your finances to get the most out of the money you have coming in.

More resources:

NAPFA—National Association of Personal Financial Advisors.
Arlington Heights, IL
847-483-5400

CFP—Certified Financial Planner Board of Standards, Inc.
Washington, DC
800-487-1497

Financial Planning Association
Washington, DC
Denver, CO
800-322-4237

National Association of Financial and Estate Planning (NAFEP)
Salt Lake City, Utah
Phone: 801-266-9900

CFA Institute
Charlottesville, VA
800-247-8132

Investment Management Consultants Association
Greenwood Village, CO
303-770-3377

Investment Advisor Association
Washington, DC
202-293-4222

Association of Investment Management Sales Executives
Reston, Virginia
703-234-4098

Association for Financial Counseling and Planning Education
Columbus, OH  43212
614-485-9650

Garrett Planning Network
Shawnee Mission, Kansas
866-260-8400