Financial Planner: The professional that could help you achieve your long-term financial goals

A financial planner charts the course of your financial life to help you achieve your long-term financial goals. Some financial planners also extend investment management services.


Managing one's finances has never been easy. Sometimes, even though you think your financial plan is foolproof, you would still face some financial mistakes. You would just realize there were some lapses in your plan, and so you'll ask, "what went wrong?" or "how come this happened?". And sometimes, you have an idea of what you want, what should be prioritized, and what to do, but you do not know how to implement it properly.

You always got questions about your wealth, investments, tax burden, financial legacy, and others. And if these questions came to the point of bombarding you then, you probably searched for some answers. Maybe, you searched through the web and got some answers, tips, and pointers. You also probably asked your family and friends, and perhaps you got some advice too. But do you feel that they weren't able to answer all of your questions? Do you think that there might be a better explanation or solution to your financial problems and questions?

You appreciate their answers to your questions, right? But sometimes, you seek more; you want a more definitive explanation about these finance-related things. And if you want these things, then maybe you are thinking of hiring a financial planner; after all, you can cut all those "side trips and short-cuts" and go directly to the professional to have that tailored financial advice. But before hiring one, here are the things you need to know.

 

What is a financial planner?

A financial planner is a specialist who aids people with their finances and helps them meet their immediate and long-term financial objectives. They try to know and understand your financial objectives, current financial situation, your attitude towards your money (what you want to with it now and in the future). After this "assessment," they would provide their insights and expertise and help you craft a "person-specific" financial plan to achieve your financial goals and needs while putting your other financial characteristics and features into consideration. They can help you do a lot of things. Financial planners can extend their expertise to give you insights into how you can reduce your spending, manage and pay your debt, save for your future or your family, allocate your investments, etc.

 

Do you need a financial planner?


It is always up to your decision whether you would employ the help of a financial professional like a financial planner. But if you hired a financial planner, you are positioned to benefit from the insights and expertise of a professional. Generally speaking, you are to benefit more from the services offered by a financial planner if your financial situation is more complex. It is like maximizing all of the services they provided since you are paying for their expertise.

If your financial situation is more straightforward compared to others, or if your personal capacity can manage it, then a "do it yourself approach" might be okay and work for you. But remember, while personal analysis of your financial situation can help you make informed decisions about spending, budgeting, and saving, you might need to make more complex situations and decisions in the future. These complex scenarios might stem out from changing and developing life situations. Financial planners are helpful regardless of your financial stage, but they are especially helpful in life-changing situations like marriage, divorce, inheritance, retirement, growing family, etc.

During these life-changing situations, financial planner's value truly shines. During these times, you will appreciate the variety of services they can put on the table. They can provide an objective perspective on how you should manage your finances to meet your current needs and future goals. They can widen your options and give expert decisions on how you should invest your money, allocate your investments, what other financial products (insurance) do you need, what your priorities should be, etc.

The list below enumerates some of the reasons why you need a financial planner's guidance and expertise.

  • To ensure that you will have enough finances for your retirement
  • You are getting married
  • You are getting divorced
  • You are passing down, buying, or selling, a family business
  • Funding education for your children
  • You don't know how to allocate your investments properly
  • If your income change
  • If you received a lot of cash or inheritance
  • If a new child will be coming to the family
  • If you want to save some many, grow assets, and pay debts
  • Facing other financial crises
  • Caring for your aging parents

Financial planner vs. Financial advisor

The terms "financial planner" and "financial advisors" are sometimes used interchangeably. But while the two are both finance-related and offer financial planning services, they are still different.

The term "financial advisor" is a broader category for professionals who help clients manage their money. They are the ones who manage investments, brokers sales and purchase of securities, or crafts tax plans.

On the other hand, the term "financial planner" is more specific since a financial planner is a type of financial advisor. Financial planners limit themselves to a targeted service or specialization like estate planning, tax, retirement, etc.


Types of Financial Planners



The term "financial planner" is an umbrella term that encompasses a lot of different individuals. Just like other professionals in other professions, financial planners have their own area of specialization. There are many financial planners; some are specialists in defined areas like tax and investment management, while others are general practitioners who offer financial planning services related to budgeting, investing, retirement, insurance, etc.

Anyone can literally consider and call themselves financial planners who offer financial planning services, but you shouldn't immediately jump on their ship. Before employing their expertise, look at their specialization or the specific financial planning services they offer and tell if that service is what you are looking for.

When you are looking for financial planners, it would be best if you will consider your needs, budget, and life stage. Below are some of the types of financial planners you can pick based on these factors.

1. Robo-advisors

Suppose this is your first time counting to a "financial planner" or "financial advisor," and your primary concern is related to investments. In that case, a robo-advisor is probably enough to meet your needs. A Robo-advisor automates portfolio and investment management. Depending on your goals and risk tolerance, robo-advisors will make and suggest a plan regarding the allocation of your money among different assets. Computer algorithms determine the investment mix suited for you, and it can also be automatically rebalanced.

Robo-advisors are also low-cost, so if you do not have much but still want to avail an investment planning service, then look for robo-advisors online. Most robo-advisors charge 0.25% or less of your total account balance. On top of this, there is a low minimum balance for most online brokerage firms that offer professional robo-advisory management.

The low minimum and low-cost charges are the things that make robo-advisors popular. However, the services offered by robo-advisors are only fit for investment management and do not include holistic financial planning.

2. Traditional Financial Planners

If you want a human element in your financial plan, then a traditional financial planner is best suited for you. Certified financial planners have undergone strict ethical and educational supervision, making them a mainstay in the financial planning community. They can give you holistic advice if you face complex financial situations and always act in your best interest.

When it comes to the fee, Certified financial planners work on a fee-only basis. They typically charge $200 to $400 (by the hour) or a flat $1000 to $3000 (by the task). Some compute their fee through asset-management fee (based on the investment size), which is typically 1% of the annual portfolio balance.

3. Online Financial Planning Services

With the technological advancement of today, you can avail of financial planning services online. Online financial planning services are different from robo-advisors since instead of a digitally powered AI, a breathing financial planner will be the one who will provide you with a financial plan. Instead of face-to-face interaction, financial planners offering online financial planning services will interact with you through technological means such as phone or video conferences. 

Clients can have a computer-driven portfolio management with a "human element" on it through this innovation. Despite online financial planning services looking like the "mixture" of the preceding two, it is still affordable. In fact, online financial planning services charge less than a traditional financial planner but a little more than robo-advisors.

  

Conclusion

Financial planning services are now available and affordable more than ever. While personally managing one's finances is not bad, it is also not harmful to employ the services of a financial planner, especially if you are in the face of a complex and life-changing situation. Their expertise and insights are valuable things that could help you achieve your long-term financial goals.