Intro: What Is a Financial Planner? & What Do Financial Planners Do?
If you have heard of financial planning, it is possible that you have been turned off by the daunting sound of it. People like having money, but they do not necessarily like to have a plan for their money. Spending it is more fun and offers immediate gratification.
However, will this instant gratification help fill the holes in your pocket in the future? Most likely not. This is where a financial planner can come in handy.
What is a financial planner? What does a financial planner do, and why might you need one? This article will address the importance of financial planning for you and your family and how those in the financial planning career can meet your needs.
Why Is Financial Planning Important?
Do you ever wonder where your life will be in ten years? If not, you should consider thinking about it and determining what goals you have for yourself. Although it is not always fun to think about, your financial future absolutely depends on the goals you set and your determination to reach those goals. Learning more about the financial planner career and what financial planners do might help you decide if a financial planner can help you meet your goals.
Do you dream of owning a home one day? Or paying off student loan debt? Or being comfortable enough financially to retire from your job a few years early and travel to places you have never been? According to the National Association of Personal Financial Advisors (NAPFA), the financial future of adults is dwindling:
- 56% of adults have no budget in place
- 39% of adults have no savings outside of retirement plans
- 50% of Americans with children do not have a will
This is where a financial planner may be able to help. What is a financial planner? Financial planners are people with expertise in financial planning and can actually help you determine your future financial goals and design a plan to help you meet them.
But exactly what do financial planners do? We are glad you asked. Read on to learn more about the financial planner job description, if a financial planner is the right person to help you, and how you can choose the right financial planner to meet your needs.
See Also: Tips on Passing the Certified Financial Planner (CFP) Exam
What Is a Financial Planner? (Job Description)
The financial planner job description is multifaceted because financial planning covers a wide range of financial needs. The Financial Planning Association (FPA) states that the financial planning career “exists to help people reach their financial goals and dreams. Financial planners demonstrate and support a professional commitment to education and a client-centered financial planning process.”
What Does a Financial Planner Do?
In basic terms, financial planners can help those who are in financial trouble and those who simply want to invest in their futures. Financial planners assist those who have no idea what financial goals to make to be financially comfortable in the future, and they assist those who have very specific goals but need help reaching them.
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Financial planners have a very important job: To invest in your future. But what do financial planners do? Read on to learn more about the specific tasks of financial planners.
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What Does a Financial Planner Do? (Financial Planner Job Function)
The question, “What do financial planners do?” can be answered in many ways because professionals in the financial planner career perform a variety of financial tasks, but let’s break it down a bit into some of the most common financial areas on which financial planners focus.
- Retirement planning
If you have a retirement plan or savings, a financial planner can help you make the most of your money by showing you how to invest your money and how much you should be saving from each paycheck. If you do not have a retirement plan or savings, a financial planner can help you form goals and devise a plan to reach those goals for retirement.
- Preparation for life-changing events
One of the most important tasks in the financial planner job description is helping people prepare for significant life events, such as marriage, divorce, or the birth of a child. These events can be unexpected and life-changing, and a financial planner can help you ensure that your money will be there as a safety net.
- Care for disabled child or aging parent
Disability can affect anyone and can happen unexpectedly. If you are a caregiver for someone else, such as a disabled child or parent, your finances can be affected as you have to cover lost job hours and/or medical expenses. What does a financial planner do for those affected by disability? A financial planner can help you understand possible costs in the future and how to create funding for them now.
- Funding education
The cost of higher education can have a significant impact on your financial future as you struggle to maneuver out of debt. A financial planner can assist you in understanding the most cost-effective ways to fund your education while leaving you with less debt in the future.
- Financial crises
A financial crisis can happen unexpectedly, like major home repairs, a job lay-off, or a serious injury or illness. What is a financial planner to do in the event of a financial crisis? A financial planner can help you create a short-term and long-term budget to help you through the crisis and can also help you prepare before a crisis occurs through savings education and goal-setting.
- Buying, selling, or maintaining a business
Businesses use financial planners, too, to meet both short-term and long-term financial goals. What does a financial planner do for businesses? A financial planner can use the current financial information of the business to analyze and tweak the company’s financial outlook. A financial planner might set important new goals for a business to consider to improve its future revenues.
Financial planners can also assist clients in tax preparation and planning, debt consolidation, insurance, and estate planning. The main goals of a financial planner are to make sure you truly understand your financial needs, your current financial situation and desired outcome, and your long- and short-term goals before designing a plan to help you reach those goals.
Education For Financial Planners
A lot goes into the education of a financial planner. Financial planners must understand the path they want to take in the profession to have a successful educational outcome.
You have probably noticed that the financial planner job description entails many financial tasks. Therefore, a financial planner typically needs to pursue a bachelor’s degree in finance or a similar major.
A student in pursuit of a financial planning degree can expect to learn:
- The basics of financial planning, such as short- and long-term goals, to achieve financial stability
- Retirement planning
- Tax planning and preparation
- Estate planning
- Investment planning and allocation
Financial planning students must ensure their ability to register as a Certified Financial Planner (CFP) with the CFP Board by completing college-level coursework in a college or university that is recognized and registered with the CFP.
Although there are other financial planner designations aside from CFP, the CFP designation is highly recognized for its members’ ethics and experience, so this designation is especially important for prospective students to consider when choosing a degree program.
Related: How to Become a Mortgage Broker
Comparing Financial Planner Designations
Financial planners can have many different financial planner designations, which can be confusing to those who are not involved in the financial planning career.
Financial Planner Career
As mentioned, a Certified Financial Planner (CFP) is an important designation to consider obtaining as a financial planner because it is highly recognized and respected in the field. The CFP is also the most generalized designation as it includes certification in insurance, taxes, retirement, education, and investment planning. Other, more specific financial planner designations one can obtain include:
- Chartered Financial Analyst (CFA)
The Chartered Financial Analyst designation is one given to highly-qualified investment specialists. A CFA designation is upheld to significantly high standards and requires one to have 48 months of investment work experience, pass the three levels of a CFA exam, become a member of the CFA Institute, and continuously practice and annually sign off on the Code of Ethics.
- Enrolled Agent (EA)
The Enrolled Agent (EA) is another one of the more specific financial planner designations that focuses on tax professionals in the financial planning career. An EA must have experience as an IRS employee and demonstrate proficiency in every area of tax planning and preparation.
- Certified Public Accountant (CPA)
The Certified Public Accountant (CPA) designation is obtained through the American Institute of Certified Public Accountants. A CPA must have at least two years of experience as a public accountant and are subject to an exam and a code of ethics.
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Choosing the Right Financial Planner
By now, your question, “What is a financial planner?” has hopefully been answered, and you might even realize that you need one. But do you know how to choose the right financial planner for you? Consider the following tips to ensure you are choosing a financial planner who will understand your needs and work with you to meet your financial goals.
1. What do financial planners do, and what do I want mine to do?
Consider your own needs. Are you struggling with tax planning for your small business? Do you want to know how you can save for retirement? Or do you want to build a small nest egg for a possible financial emergency?
Make sure you fully understand the financial planner job description and make it work for you. If you know what financial planners can and cannot do, you can be more careful in your search by being aware of empty promises by those who are simply desperate for your business.
2. Consider how a financial planner is paid.
What do financial planners do to make an income? Financial planners can operate on fees only, commission only, fee-offset, or fee-based with commission. It might be wise to consider fee-only financial planners because you can rest assured they are only collecting fees and not also commission on products or services they sell.
3. Check financial planner designations.
A financial planner should be motivated to earn your trust. This is where financial planner designations are important. Those who earn a designation commit themselves to the code of ethics of the designation and prove they have the education, experience, and determination necessary to become certified.
Conclusion: What Do Financial Planners Do? (Job Description)
Now that you have a better understanding of what it is that financial planners do, we hope that you can go forward confidently to find the right financial planner for your situation and needs. Be sure to check out our top rated financial planner guides to find a financial planner near you that can make your financial vision a reality!
Read More: How Expensive are Financial Advisors?
Image sources:
- https://www.bigstockphoto.com/image-109305863/stock-photo-financial-planning-accounting-report-spreadsheet-concept
- https://www.cfp.net/
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