When it comes to managing your finances, you may be inclined to take matters into your own hands, but working with a professional can help you see your personal finances through a different lens. Planners can determine your major areas of improvement and create a plan to help you manage your finances efficiently so you can hit all your financial milestones.
It’s important to know that you don’t have to be astronomical high net worth to work with a financial planner. Whether you’re building an empire or a modest emergency fund, a financial planner can help you set goals and create a plan for hitting those goals according to your desired timeline.
“From layoffs and wage cuts to hospital bills, many financial situations can prompt a need to think about your finances and organize your money,” said Diane Bourdo, certified financial planner and president of the Humphreys Group. “A smart step toward financial preparedness is working with a financial advisor.”
What exactly does a financial advisor do?
A financial planner’s job is to create a roadmap for their client that helps them build a stronger foundation in the short term that, in turn, supports their long-term goals. Note: not all financial advisors are certified financial planners.
To become a certified financial planner, you must meet the following requirements:
- Experience required: Complete 6,000 hours of professional experience related to the financial planning process, or 4,000 hours of apprenticeship experience.
- Education requirements: meet certain educational requirements which includes completing a course in financial planning through a CFP Board Registered Program, and holding a bachelor’s degree or higher (in any discipline) from an accredited college or university.
- Exam requirements: Then you must pass the actual CFP® exam, which is a 170-question, 6-hour exam divided into two sections.
- Ethical requirements: Finally, you must commit to the CFP Board to act as a fiduciary as the last step in the process, which means acting in the client’s best interest at all times when providing any financial advice. You must also commit to other high moral and ethical standards and must disclose information about your background, and the CFP Board will conduct a detailed background check.
Some key ways a certified financial planner can help you get your finances in order:
- Revenue planning and management
- Investment planning
- Risk management and insurance planning
- Tax planning
- Retirement planning
- Land planning
When does it make sense to see a financial planner?
Regular meetings with a financial planner will help you establish healthy financial habits and keep you accountable to your goals. However, there are major life events that may prompt you to seek out a certified financial planner for guidance on how to proceed. These life events may include:
- A job loss, promotion, or major career change
- A recent engagement, marriage, or divorce
- Receive an inheritance
- Expand your family
- Start your own business
- Entering retirement
However, many planners recommend that individuals begin working with a financial planner earlier in their income years. If you haven’t worked with a financial planner, you don’t have to wait for a major life event to happen to do so.
“Unfortunately, most people don’t start working with a certified financial planner until there is an “event” in their life, such as getting married, having a child, divorcing, changing jobs, buying a house and more,” said Carol Petrov, certified financial planner, CPWA®, and Vice President of Kendall Capital Management in Washington, DC. “You’d better start as soon as possible. Certified financial planners are trained to help people—especially people who are good savers—strategize to achieve multiple financial goals. Starting early gives you a strategy to follow as your income and your assets grow and grow.
How much does a financial planner cost and how do I find one?
The amount you can expect to pay to work with a certified financial planner or financial advisor varies across the board depending on the services provided, frequency of those services, how the planner charges, and more.
“Advisors who sell financial products receive a commission on each transaction. Fiduciaries who sell advice are paid a percentage, usually 1% to 1.5% of the value of a client’s portfolio,” said Petrov. “There are also financial planners who charge a fee just for the financial plan or charge an hourly fee if you need advice on a particular goal or update an existing plan. Those fees can range from a hundred dollars per hour to thousands of dollars for a one-time comprehensive plan.
But the good news is that there are many ways you can have one-on-one time with a financial advisor at a lower (or in some cases zero) cost.
- Check your work benefits plan: Your employer may offer financial planning services as part of your benefits package.
- See if you qualify for pro-bono services: Organizations like Financial Planners Association (FPA) and the National Association of Personal Financial Advisors (NAPFA) offers personalized financial planning advice to thousands of qualified consumers nationwide—free of charge.
- Start a free consultation: Some financial planners may offer a free initial consultation to lay the foundation for your long-term financial plan. It won’t include everything you need to accomplish all of your goals, but it will answer some of your questions and give you a feel for whether or not this specific planner is right for you.
The takeaway
Your financial plan will likely include several moving parts. As you continue to earn more money, build wealth, save or pay off debt, and face new circumstances that challenge your financial plan, working with a trusted financial planner can help. you to focus and track your goals.