Financial Planners and What they Do
A financial planner or personal financial planner is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes but is not limited to these major areas: cash flow management, education planning, retirement planning, investment planning, risk management and insurance planning, tax planning, estate planning and business succession planning (for business owners).
A financial planner looks at your assets and calculates your financial strengths and weaknesses, in addition to evaluating potential opportunities and threats to your financial security. Based on these evaluations, the financial planner will then make recommendations as to how your assets should be allocated. Other aspects of financial planning deal with asset protection, budgeting and cash flow, survivor insurance, tax planning and other issues such as disability benefits, estate liquidation and retirement planning.
Some people see a financial planner once every few years to monitor whether their financial course is still in line with their needs. Others want a written long-term financial plan that requires regularly scheduled meetings to make certain the financial course is stayed. How often you meet your financial advisor depends on how much time and energy you wish to devote to the process. This includes considering whether your investment strategy is risky and/or your needs change frequently.
Choosing a Financial Planner
Before working with a financial planner, you should establish that the planner is competent and worthy of trust, and will act in the client's interests, rather than being primarily interested in selling to you financial products for his own financial benefit. As the relationship unfolds, your objective in working with a financial planner is to clearly understand what needs to be done to implement the financial plan created for you. So, in many ways, a financial planner's step-by-step written implementation plan of action items, created after the plan is completed, has more value to you than the plan itself.
A financial planner is there to guide you and act as sounding board for your decisions. You should never feel pressured or bullied. A good financial planner will get to know you, and should understand what is important to you and what is not.
Many financial planners, especially in areas densely populated with baby boomers, will claim to be elder or senior specialists. Sometimes this self-designation is simply the result of a few fast online courses or a one-hour seminar. The North American Securities Administration Association (NASAA)
has an entire section of their website devoted to senior fraud, as (unfortunately) the prevalence of such crimes is rising. When consulting with any type of professional, you should check credentials and references fully before entrusting them with your assets.
Other issues to consider include:
- The longer he or she has been in business the better. Ask to speak to current or past clients.
- Certification and licensing are important. Make sure to verify these, and also ask if he or she is registered with the state or federal government.
- Find out exactly who will be reviewing your finances. Will it be one person or a handful of individuals? And to whom should you direct your questions?
- Make sure only your best interests will be served. Many people prefer fee-based planners to their commission-based counterparts. (By law, an SEC-registered, fee-based financial planner must offer you a Form ADV Part II disclosure document.) Ask about the percentage of the investment or premium the financial planner receives on what they sell—including annuities, bonds, insurance, mutual funds and stocks. It’s also a good idea to determine what the exact affiliations are with the other companies he or she uses.
Finding a Financial Planner
Use trusted resources to find a financial planner. Be vigilant and trust your instincts. Important resources in determining the track record and trustworthiness of your financial planner include the Securities and Exchange Commission and Certified Financial Planner Board of Standards, Inc.
