A financial planner evaluates your financial situation and develops a strategy to assist you in achieving your objectives. In addition, certain financial planners offer investment management services.
When it comes to managing your finances, you may have various sources to seek information, including the internet, friends, family, and social media influencers. However, a financial planner can offer personalized and professional advice that is designed to meet your unique needs. By seeking the guidance of a financial planner, you can cut through the noise and receive expert advice that is tailored to your specific financial situation.
What is a financial planner?
A financial planner can assist you in achieving your current financial objectives as well as long-term goals. This involves evaluating your financial status, comprehending your money’s purpose for you (presently and in the future), and aiding you in developing a plan to achieve those objectives. Financial planners can assist you in reducing expenses, paying off debts, and saving and investing for the future.
Similar to physicians, financial professionals specialize in specific areas such as taxes or investments, while others, such as certified financial planners, are generalists who offer guidance on a broad range of topics, including budgeting, investing, insurance, and retirement planning.
Do you need a financial planner?
Whether you need a financial planner depends on your personal financial situation, goals, and preferences. If you find managing your finances overwhelming or lack the time or knowledge to make informed decisions, a financial planner can be helpful.
A financial planner can provide expert advice and guidance to help you achieve your financial goals, whether that involves saving for retirement, paying off debt, or investing in the stock market. Additionally, they can assist in creating a financial plan tailored to your unique needs and provide ongoing support and adjustments as needed.
It’s worth noting that financial planners typically charge fees for their services, so it’s important to consider the cost and potential benefits before deciding to work with one. Ultimately, the decision of whether to work with a financial planner is a personal one that should be based on your individual circumstances and goals.
Types of financial planners
The best type of financial planner for you will vary based on your budget, life stage, and specific needs. Below, we’ll provide an overview of some available options.
Robo-advisors
If you’re in the early stages of your financial journey, a robo-advisor may be sufficient for your needs. Advances in technology have enabled both traditional firms like Vanguard and Fidelity, as well as online-only companies like Betterment and Wealthfront, to significantly lower the cost of portfolio management. These companies can be ideal if you require investment management but not comprehensive financial planning.
Robo-advisors utilize computer algorithms to construct and manage a low-cost investment portfolio tailored to your financial goals for a nominal fee. Many of the top options charge 0.25% or less of your account balance. The investment mix is determined by the algorithm and is automatically adjusted as needed. With a basic account, you can start investing with as little as $100 or even less.
The affordability and accessibility of robo-advisors can lower barriers to achieving your financial objectives, which is important because avoiding the market can negatively impact your retirement savings. You can begin with a robo-advisor and later add a human advisor if necessary. (Interested in this approach? Take a look at our list of the best robo-advisors.)
Traditional, in-person financial planners
If your financial situation is complex or requires ongoing planning, a traditional, in-person financial planner may be a better option. A Certified Financial Planner (CFP) can offer personalized, one-on-one advice for even the most intricate financial situations. The CFP designation is an official recognition that the provider has completed a comprehensive formal training and testing process.
A fee-only CFP typically charges by the hour (typically ranging from $200 to $400) or by the task (a flat fee of $1,000 to $3,000, for example). Some may charge based on the size of the investment portfolio they manage for you, known as an assets-under-management fee, which is usually 1% of your portfolio balance per year. The initial consultation to discuss your needs and the services they offer is typically free.
Online financial planning services
There are several online planning services that offer a combination of computer-driven portfolio management and access to human financial planners. In many instances, you’ll receive a customized financial plan and a dedicated financial planner, but you’ll communicate with them through video conference or phone calls rather than in-person meetings.
Online planning services like these typically charge more than robo-advisors but less than traditional, in-person financial planners. Examples of companies in this category include Facet Wealth and Empower.
| Facet | Vanguard Personal Advisor Services | Harness Wealth |
|---|---|---|
| Fees $2,000 and upper year (free initial consultation) | Fees 0.30%management fee | Fees Up to 1%per year |
| Account minimum $0 | Account minimum $50,000 | Account minimum $250,000 |
| Promotion Get $250 rewardinto Facet brokerage account for new members who transfers at least $5,000 within the first 90 days of their Facet membership.* | Promotion Noneno promotion available at this time | Promotion $250 offone year of financial or tax planning |
| LEARN MORE | LEARN MORE | LEARN MORE |
| ADPaid non-client promotion | ADPaid non-client promotion | ADPaid non-client promotion |
Financial planner vs. financial advisor: What’s the difference?
The term “financial advisor” or “financial consultant” is a broad term that includes various professionals who assist individuals with their finances.
A financial planner is a specific type of financial advisor that specializes in providing comprehensive financial guidance, in addition to services like investment management. For instance, financial planners can assist with questions such as “How can I save for both my child’s college education and retirement simultaneously?”
Working with a financial planner
Online financial planning services like robo-advisors and hybrid services often provide virtual tours, demos, and the opportunity to test-drive their investment platform before committing to a plan. Before you sign up, it’s important to meet with your dedicated financial planner to see if you are a good match. During your initial consultation, you should ask about fees, how the financial plan will be presented, and how often to expect ongoing communication.
The first step in working with a CFP or an online planning service is to review your current financial situation, including your goals, current financial picture, and risk tolerance. Financial planners will want to know your short- and long-term financial priorities, how much money you have coming in and going out, what assets and liabilities you have, and how you feel about market volatility.
You can expect regular contact with your financial planner, but the form of that contact will depend on the type of planner you choose. Robo-advisors will typically send regular emails and account prompts, while online planning services and traditional planners will meet with you throughout the year. It’s important to keep your planner updated with any changes to your financial situation.
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