What Is a Financial Planner, and Do You Need One?
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You’ve got financial questions. The internet’s got answers. So do friends, family members and TikTok influencers. Financial planners can cut through the noise and provide expert money advice that’s tailored specifically to your needs.
Key Takeaways
Finding a financial planner starts with identifying the right type of planner for your needs and then setting up an initial meeting to see if they feel like a good fit.
If you're not interested in a traditional financial planner, online planning services and robo-advisors are also options.
Looking up a planner's credentials and disciplinary history is a good way to do your due diligence before entering a financial planning relationship.
What is a financial planner?
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 does a financial planner do?
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.
» Learn more: How much does a financial advisor cost?
How do I work with a financial planner?
An initial meeting with a financial planner 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. Robo-advisors typically send regular emails and account prompts while online planning services and traditional planners will meet with you throughout the year. You should update your planner with any changes to your financial situation.
Next steps: 10 questions to ask a financial advisor
Do I 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 or an inheritance.
» Take our quiz: Do I 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. We'll outline a few options below.
Robo-advisors
If you're just starting out, a robo-advisor may be enough to meet your needs. Automation has enabled traditional firms such as Vanguard and Fidelity, as well as online-only companies like Betterment and Wealthfront, to substantially lower the price of portfolio management. These companies are ideal if you need investment management but not holistic financial planning.
Robo-advisors build and manage a portfolio of low-cost investments suited to your financial goal for a small fee — many top choices charge 0.25% or less of your account balance. The investment mix is determined by a computer algorithm and is automatically adjusted when needed. At the basic account level, you can start investing with $100 or even less.
The low-cost, easy-entry nature of robo-advisors reduces barriers to working toward your financial goals. That's important because avoiding the market can starve your retirement. You can start with a robo-advisor and add a human advisor later on if needed.
» Ready to get started? View our list of the best robo-advisors
Traditional, in-person financial planners
For those with complicated or ongoing planning needs, a traditional, in-person financial planner may be a better fit. A CFP can provide holistic, one-on-one advice for the most complex financial situations. The official CFP designation indicates that a provider has gone through a rigorous formal training and testing process.
A fee-only CFP typically charges by the hour (usually $200 to $400) or by the task (a flat $1,000 to $3,000 fee, for example). Some might charge based on the size of the investment portfolio they are managing for you; this is called an assets-under-management fee and is typically 1% of your portfolio balance per year. The initial consultation to discuss your needs and their services is usually free.
Before you enter a relationship, ask whether the person you’re considering is a fiduciary. (Members of the National Association of Personal Financial Advisors, for example, fill both the fiduciary and fee-only requirements.)
» Learn more: How to find a financial advisor near you
Online financial planning services
There are several online planning services that combine computer-driven portfolio management with access to living, breathing financial planners. In many cases, you'll get a dedicated financial planner and a comprehensive financial plan, but you'll meet with that advisor via phone or video conference rather than in person.
Online planning services like this typically charge more than a robo-advisor but less than a traditional financial planner. Examples of companies in this space include Facet Wealth and Empower.
Online financial planners like robo-advisors or online planning services often offer virtual tours, demos and even the chance to test-drive the investment platform before you sign up. With an online planning service, you may be able to meet with your dedicated financial planner before deciding to sign on.
» Compare online advisors: Our picks for the best financial advisors
How to find a financial planner
There are a few factors to consider when shopping for a financial planner, such as credentials, disciplinary history and specialization.
Credentials
The CFP designation is regulated by the Certified Financial Planner Board of Standards. 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 or not a financial planner is a CFP using the Certified Financial Planner Board of Standards' CFP lookup tool.
Disciplinary history
That same 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 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).
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.
When you're considering working with a particular financial planner, it's a good idea to 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.
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