What Is a Financial Planner, and Do You Need One?
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A financial planner is a professional who takes inventory of your finances and then creates a plan to help you meet your needs and long-term goals. Financial planners can help clients meet their money goals, whether that's investing, saving for retirement, paying for college or paying off debt.
The term "financial planner" isn't regulated. This means anyone, regardless of their training, credentials, or duties, can call themselves one. However, some financial planning designations — such as certified financial planners (CFPs) — have a fiduciary duty to their clients, which means they’re obligated by law to put the client’s best interests first.
What you can expect from a financial planner
Keep in mind that financial pros are like doctors: Some are specialists in defined areas, such as taxes or investments. Others are general practitioners, offering advice on budgeting, investing, insurance, retirement planning and more.
Typically, when you work with a financial planner or an online planning service, you'll begin with a review of where you stand. You’ll be asked about:
Your goals. What are your short- and long-term financial priorities?
Your current financial picture. How much money comes in and goes out? What do you own, and what do you owe?
Your risk tolerance. If your financial planner plans to help you invest, they should ask about your risk tolerance and investing goals. This will help them to decide how much of your portfolio should be in stocks versus other investments like bonds.
» Curious about the cost? Read an overview of financial advisor fees
How to start working with a financial planner
Most good financial planners will offer a complimentary introductory meeting. This initial meeting is like a first date: It’s the chance to get to know one another and see if you mesh on a personal and philosophical level. Take this opportunity to find out everything you can, including how much you can expect to pay, how the financial plan will be presented and how often to expect ongoing communication.
Once you begin to work with a planner, you can expect them to be in fairly regular contact with you, though the form that contact takes will vary and should be based on your preferences. You should update your planner with any changes to your financial situation.
Next steps: 10 questions to ask a financial advisor
How to know if you need a financial planner
Generally speaking, the more complex your financial situation, the more likely you are to benefit from a financial planner.
If your finances are simple, you may be able to take a DIY approach. But financial planners can provide an objective perspective and bring expertise to decisions about how you should invest your money, what your financial priorities should be, and what sort of insurance coverage and other protections you need. A financial planner can be especially helpful when you're faced with a life change — think marriage, a divorce, home purchase, having children, business startup or an inheritance.
» Take our quiz: Do you need a financial advisor?
Types of financial planners
The type of financial planner that is best for you will depend on your needs, life stage and budget. The table below shows common types of financial planners and what they could do for you.
Common types | What to look for | Best for |
|---|---|---|
Financial coaches | Some financial coaches have completed training programs created by the Association for Financial Counseling and Planning Education (AFCPE). Look for one that holds either the AFCPE’s Accredited Financial Counselor or Sage Financial Solutions’ Accredited Personal Financial Coach designation. | Financial coaches focus on the basics of financial literacy, such as how to save money or reduce spending. They don’t manage investments. |
Certified financial planners (CFPs) | The official CFP designation indicates that a provider has gone through a rigorous formal training and testing process. | CFPs may be able to address complicated or ongoing planning needs and provide investment management. |
Chartered financial consultants (ChFCs) | ChFCs have completed similar education requirements to CFPs. They have a fiduciary duty and must adhere to The American College of Financial Service’s code of ethics. | ChFCs may be able to address complicated or ongoing planning needs and provide investment management. |
Robo-advisors | Robo-advisors use algorithms to build and manage a portfolio of low-cost investments suited to your financial goal. The algorithm determines the investment mix and automatically adjusts it when needed. The minimum investment is usually small. | Investment management only. |
What to look for in a financial planner
There are a few factors to consider when shopping for a financial planner, such as credentials, disciplinary history and specialization.
Credentials
We recommend working with credentialed professionals because they’re typically easy to verify. You can look up whether your financial planner actually holds a certification and what standards they adhere to as a result.
CFPs
The CFP designation is regulated by the CFP Board. Only financial professionals who have satisfied the board's educational, exam, work experience,and ethical requirements may use it. CFPs must act as fiduciaries to their clients to maintain the designation.
You can verify whether a financial planner is a CFP using the CFP Board’s lookup tool.
ChFCs
The American College of Financial Services requires financial consultants to complete a financial planning program and adhere to its code of ethics to hold the ChFC designation. And ChFCs undergo continuous education requirements to maintain their certification.
You can verify that your financial consultant is a ChFC using the American College’s lookup tool.
Disciplinary history
That same CFP lookup tool will also show you whether a financial planner has ever received any formal complaints or if they've ever had any legal or disciplinary actions taken against them by the court system or the CFP board. It's worth being cautious about engaging a financial planner who has a history of wrongdoing.
Specialization
Some financial planners specialize in a particular type of client. Some of these specialized planners obtain specialized credentials (potentially in addition to a CFP). Look up the meaning of any abbreviations or credentials after their name to see if their specializations are a good fit for your financial situation.
For example, Chartered Special Needs Consultant (ChSNC) is a designation that indicates expertise in offering financial planning services to people with disabilities and their families. It is offered and regulated by the American College of Financial Services.
» Next step: Search for a financial advisor near you
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