What Is a Financial Planner, and Do You Need One?

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, home purchase, having children, business startup 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.

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.