Do I Need a Financial Planner?

What Is a Financial Planner?

Financial planners can help you create a plan to reach short-term and long-term financial goals. They can help you manage your budget and provide guidance in terms of your overall financial health and your progress toward specific goals.

A financial planner is a type of financial advisor whose role is specifically to help people plan for the future. "Financial advisor" is the umbrella term for all professionals who perform tasks like wealth management, estate planning and investment guidance.

Unlike certain similar professions, financial planners are not specifically regulated by the Financial Industry Regulatory Authority (FINRA) or the U.S. Securities and Exchange Commission. (Investment advisors, for example, must register with the government in order to do their job.) However, financial planners often obtain professional credentials and adhere to regulations that apply in their line of business—your financial planner may be an accountant, for instance. Many financial planners are also certified through the Certified Financial Planner Board of Standards Inc. and are qualified to offer these services:

• Financial planning basics (such as cash flow and debt management)
• Investment planning
• Retirement savings and income planning
• Tax and estate planning
• Risk management and insurance planning
• Education planning

If you decide to work with a certified financial planner (CFP), they will review your financial information and work with you to set goals and viable timeframes. Once the plan is in motion, either you or the financial planner (depending on your preference) will monitor your progress and make adjustments as needed to ensure you stay on track.

When Is a Financial Planner a Good Idea?

You don't have to hire a CFP to handle your financial planning. But you could benefit from the assistance of a licensed professional if you:

• Want to get a handle on your finances but don't know where to start.
• Need a detailed but realistic financial plan that's easy to follow.
• Need general assistance with investment, retirement, tax, estate, insurance or education planning.
• Got a big raise at work and aren't sure where to invest the extra funds.
• Recently experienced a major life event, like getting a divorce, having a new baby or receiving an inheritance.
• Want to minimize your tax liability.
• Want to lower your investment risk and yield greater returns.
• Have minimal time in your schedule to handle your own financial planning.

However, you may want to hold off on hiring a financial planner if:

• You are worried about the cost of services. Are you having trouble making ends meet or burdened by your debt? It may be best to get a handle on your budget, start saving money and create a plan to get out of debt before you hire a financial planner. A credit counselor can help you create a plan to get financially stable.
• You already have a financial plan that is working well. If your plan is running smoothly, and you're well-equipped to make adjustments as needed, a financial planner may not be necessary.

How to Choose a Financial Planner

Before you begin your search, understand that some professionals may call themselves financial planners without actually having the proper credentials, certifications or know-how. Confirm that the professionals you're considering are certified through the CFP Board. This means individuals have met the board's education, experience and examination requirements, and will be held to high standards. Use this online tool to verify their credentials.

Some other factors to consider when shopping around for a financial planner:

• Are services provided in-person or online?
• Does their knowledge and experience suit your needs?
• What credentials and licenses do they hold?
• Do they work for a company or are they on their own?
• Do they prefer that clients fall within a certain asset range or require a minimum investment amount?
• Do they offer a fee- or commission-based compensation structure?
• Are their fees comparable to what other financial planners charge for similar services?
• How have they been reviewed by past clients?
• Have they been disciplined by regulatory authorities while working as a financial planner?

Need help finding a financial planner? Use the Find a CFP Professional tool operated by the Certified Financial Planner Board of Standards Inc. to identify financial planners that may be a good fit.

Alternatives to Traditional Financial Planners

If you'd prefer not to hire a financial planner, consider these alternatives:

• DIY financial planning: If you'd like to try putting together your own financial plan, you can use this detailed guide from Experian to get started. It provides a four-step process you can use to move forward with setting and working toward your financial goals.
• Robo-advisor: Need help getting your investment portfolio up and running? A robo-advisor automates the entire process and can typically get the job done for a fraction of what a human financial planner or investment advisor would charge.

Feeling a bit overwhelmed? You can always hit the brakes later on and bring in a financial planner to help you finish what you started. This move could turn out to be quite beneficial and save you money over going with a financial planner from the get-go.