What Is a Financial Planner?

(2 of 7)

What Is a Financial Planner?

What is financial planning and what is a financial planner?

Financial planning is the method of managing one’s finances in order to achieve one’s goals and dreams in life. A financial planner is a professional who creates financial plans for people.

While everyone already does financial planning to some extent, the term in its professional use involves a set of procedures that individuals can use methodically. (In its simpler use, a financial plan can be as short as a single page with a small set of goals and actions—such as paying off debt, starting a retirement account, and opening an emergency fund—and a way to monitor them.) The procedures in a professional plan are defined, measurable, documentable, flexible, and reviewable. They serve as a guiding light that you can use to achieve success in your life. A financial plan subjects your income, spending and goals to a process that can provide insight and discipline to your financial life. In modern times, most of it is done with the aid of special software.

Why might you need it?

Financial planning covers a number of life areas such as your investments and property and income, taxes, and retirement planning, among many others. It addresses a number of specific goals, such as these:

• Removing debt
• Funding a retirement plan
• Making major purchases
• Starting a business
• Investing money
• Insurance
• Planning your taxes

It even helps you plan for the transfer of your assets to family, charities, etc. after you are no longer here. Financial planners will create plans that address some or all of these concerns so that you can make your money work for you.

The value of a financial planner

A good financial planner can show you how each financial decision you make affects the other areas of your finances. Services offered depend on where you are in your life. For example, if you are in your 30s and planning for goals like buying a home and saving for your children’s college expenses, a planner can help you determine what you can afford and create a savings and investment plan to help you get there. If you are in your 40s and paying down a mortgage, a planner can help you find ways to pay it off faster. If you are in your 50s and planning to retire, a planner can help you manage your money better and give you investment advice if they are also a financial representative of a broker/dealer or registered investment adviser..

What types of financial planners exist?

There are dozens upon dozens of types of financial planners. You will often see the letters on their business cards—letters such as CFP, CRPC, CRC, CFA, RIA, etc. Each one requires a certain amount of training and education in order to work in its capacity. Several different educational institutions offer training and award these certifications. Here are a few of the more well-known ones:

• Certified Financial Planner. One of the most common and well-known financial planning licenses is the Certified Financial Planner (CFP®) designation. CFPs are trained in a broad range of financial planning skills.
• Certified Public Accountant. A Certified Public Accountant (CPA) is an expert in the areas of accounting and taxes, but not necessarily in other areas of financial planning.
• Registered Financial Consultant. A Registered Financial Consultant (RFC™) is a working financial planner with certain educational and experience-based requirements obtained over the course of his or her planning career.
• Chartered Financial Consultants. Chartered Financial Consultants (ChFC) tend to specialize in insurance and estate planning, though they can also do general financial planning.