Defining Financial Planner
A financial planner helps customers manage their money and achieve long-term goals.
Financial planners must understand personal finance, taxes, budgeting, and investment. Many advisors specialize in tax, asset allocation, risk management, retirement, or estate planning, targeting young professionals or retirees.
Financial planners help customers invest, save for retirement, support a college or a new business, and preserve money.
Financial Planner Role Clarification
The CFP Board defines financial planning as “a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.”
Many financial planners take a holistic approach to their clients’ well-being, while others specialize in retirement funds. They may discuss family, work, education, and health finances.
Fiduciary financial planner
Financial planners are fiduciaries. They must work in a client’s best interests and cannot accept third-party compensation while proposing economic goods.
Financial advisors use different titles. The Investment Advisers Act of 1940 makes registered investment advisors (RIAs) fiduciaries who counsel high-net-worth people on investing. The SEC, or state securities authorities, oversees them.
Financial planners must be well-educated, trained, and experienced to advise customers on financial products. A professional credential, such as the certified financial planner title, can demonstrate these qualifications.
The CFP® Label
The nonprofit CFP Board administers the CFP test and issues the most prevalent professional credential, Certified Financial Planner® (CFP®).
A certified financial planner knows financial planning, taxes, insurance, estate planning, and retirement. After passing the CFP® Board’s first examinations, candidates must attend yearly education programs to retain their skills and certification.
A CFP® can do more than advise clients on investing. Their clients may need help with budgeting, retirement, education savings, insurance, or tax efficiency.
Fee-based vs. commission-based financial planners
Financial planners and advisers are usually fee-based or commission-based.
Financial advisers provide flat rates based on hourly, project, or assets under management (AUM). Client fees are their primary source of income. However, fee-based advisers may receive commissions for financial product sales. On the other hand, fee-only advisers solely receive income from client payments.
Consultants on Commission
Financial advisers who offer items and open accounts for customers receive commission. Companies whose products and services the adviser recommends pay commissions. Commission-based advisers can also open client accounts.
Commission-based financial advisers may be paid to recommend investment products. Fee-only planners are untempted.
Selecting a Financial Planner
Interview at least three financial planners to find your best fit. Get solutions to these questions:
- Your credentials?
- Could you offer references?
- What and how do you charge?
- What’s your specialty?
- Will you be my fiduciary?
- What services can I expect?
- How will we resolve disputes?
Check the status of a CFP® on the CFP Board website.
What do financial planners do?
Financial planners assist customers with money management and long-term goals. The focus can be broad or restricted. Some advise customers on savings, investments, insurance, retirement, college, taxes, and estate planning. Others specialize in retirement or estate planning.
Financial advisors may market investments, insurance, and other goods. Others assist customers in building an investing strategy but let them decide.
Financial planners charge how much?
According to a 2021 AdvisoryHQ report, financial advisers charge $120 to $300 per hour. Per-project costs range from $275 to $4,500, depending on the complexity of the work. College preparation “package deals” cost $275–$1,500. Comprehensive financial planning costs $2,000–$4,500.
Commission-based financial advisers get paid when customers buy their products. Fee-only financial planners don’t earn product commissions. Instead, they charge per hour, project, or AUM.5
What distinguishes financial planners from advisors?
Not all financial advisors are financial planners. Financial planners assist individuals, families, and corporations in setting long-term financial goals. Financial advisors may specialize in investing, taxes, retirement, or estate planning.
A “financial advisor” can be any professional who advises individuals on their finances, including licensed financial planners. They may assist customers in managing their money, investing, purchasing and selling stocks and funds, and preparing estates and taxes.
- Financial planners assist people, families, and organizations in managing their money and long-term goals.
- Financial advisors may have the “CFP®” credential to prove their expertise.
- Financial planning helps with budgeting, investing, retirement savings, taxes, insurance, etc.