In general, people who seek financial planning services are forward thinking, conservative, and want to be able to care for the people they love. When financial planning is well done, they have the peace of mind that comes with knowing they can continue to live their chosen lifestyle during their retirement years and will be able to help out loved ones, when necessary.
Financial planning can be done either on your own or with assistance from a professional. You need to know what you can expect from a good financial planning provider. The first order of business is to understand the difference between a service provider with a valid certification in the field who is capable of providing sound fiduciary advice and one who is simply a talented sales person.
Financial Planning: What Is Involved?
The financial planning process includes:
The ability to understand your goals, i.e. knowing when and how you will use the money available to you. Once you have this understanding, then an action plan with concrete steps must be developed.
A financial adviser, or planner, must gather data about your personal and financial life in order to give advice that will allow you to reach your goals. This information is used to help you learn how and when your goals will be accomplished by projecting it.
What Is Carried Out By A Good Financial Planner?
You will gain advice from a good financial planner in the following areas:
- How you need to change the way you handle your finances.
- How much of your income must be saved.
- Which types of accounts for retirement are best in your case.
- The mortgage type that is best for you.
- How much and what kinds of insurance you need, including disability, long-term care, and life insurance as well as health, casualty, and property insurance decisions.
- The size of emergency fund you need.
- How your tax situation can be improved.
- Over a given time frame, the required rate of return to reach your goals.
- Whether or not you should pay off your home.
- What risk level for investments is appropriate within your account types.
In addition, to these services, tax planning and estate planning is also provided by many financial planners.
Do I need a financial Planner?
Listen to Brittney Castro explain exactly why a financial planner can be a great benefit for you:
How can I find out which financial areas a planner is qualified to give advice on?
Talk to the financial planner you are considering and ask them the questions listed above. Also, find out if they put their advice into written form for you.
How much does it cost to hire a financial planner?
Charges from financial planners may come in any of the following ways:
- Flat fee for a specific project completion.
- Retainer fee on a quarterly or annual basis.
- Percentage of managed assets fee, which ranges from 2% annually to 0.5%. In general, the fee is lower the more assets you have.
- Commissions from insurance or financial products purchased from them.
- A combination of commissions and fees.
How can I find out how my financial planner charges?
Before you hire a financial planner, ask them to explain clearly their compensation requirements.
Registered investment advisers are required to provide an ADV Part Two, which is a document designed to disclose any potential conflicts of interest in addition to a detailed fee schedule.
A reputable financial planner will never:
Have a recommendation for a long-term financial plan for you and understand what your personal goals are. You are probably talking to a financial sales person and not an actual financial planner if you meet with someone who immediately begins to talk about a specific financial products after meeting you.
A good financial planner will:
Ask you for financial data and request account statements to understand your financial life.
Is investment advice also offered by financial planners?
Investment advise is also offered by some financial planners. However, financial planning and investment advice are two entirely different aspects of money management. Find out if the financial planner you are talking to only offers planning services or if they also give specific investment advice.