What does a financial planner do?

There is a lot of confusion out there with the term “financial planner,” and what they do for clients. Some planners have extensive credentials and professional designations, such as a Certified Financial Planner (or CFP), while others don’t have any.

Some planners sell financial products, while others specifically exclude the sale of products from their services while focusing on planning and advice. Others may do a little of both.

Some planning is focused on very narrow subjects, like insurance, small business and tax planning, while other planners may take a larger holistic approach.

What kind of financial planner do you need?

Because of these differences, to get the right match, it is important to understand what you are looking for in a planner. Some people need broad-based guidance, and this is where an experienced professional like a Certified Financial Planner (CFP) may be the best fit. Others may need help only with life insurance or with a particular mutual fund or other security, in which case a registered representative of a broker-dealer (a firm that sells financial products) or a life Insurance agent may be sufficient.

What is a fee-only financial planner?

Finding a financial planner who is a fiduciary, who always acts in the best interest of the client is very important to avoid conflicts of interest.

At F5 Financial, we are FEE-ONLY, meaning we charge a fee for planning and specifically exclude the sale of financial products from our services. This helps prevent a conflict of interest when determining which investments are best for the client and assures a fiduciary process.

The CFP Code of Ethics

What does this procedure look like? The Certified Financial Planner (CFP) board lays out a clear framework, and we use the CFP Board’s code of ethics seven-step financial planning process with our clients. What is it, and how does it work?

1. Understand circumstances

• Step 1 is Understanding the client’s personal and financial circumstances. This involves initial meetings with the client and getting to know them through conversations and interviews. If the planner doesn’t know the client and what their individual situation is, it becomes impossible for the next step to take place. For example, if the client doesn’t have kids, then education planning is not likely to be important, but neglecting the same planning process for a couple with 3 kids (for whom they want to provide college tuition support) would be a huge planning omission!

2. Identify goals

• Step 2 is Identifying and Selecting Goals. These goals can be short-term (like getting out of debt or purchasing a house) or long term (like having enough money in retirement). They can be financial (have a million-dollar portfolio by the time I’m 60) or personal (get the kids through college, sell the house, and move to Florida!). Oftentimes these personal goals are intertwined with financial goals because a financial goal must be met to obtain the personal goal.

3. Analyze courses of action

• Step 3 is Analyzing the client’s current course of action and potential alternative courses of actions. After understanding the client’s situation by gathering financial documents and information, interviewing them, and understanding their goals, the planner will analyze their situation and examine if/when they will be able to meet these goals. Oftentimes this involves the use of advanced financial planning software, in addition to other specialized software packages, that address issues like social security and taxes. The planner will then develop alternate plans of action that will help the client meet these goals most efficiently.

4. Develop the financial plan

• Step 4 is Developing the Financial Planning Recommendations. After developing the alternate plans of action, the planner needs to determine the best steps to take for the client to obtain their goal(s) and solidify a recommendation.

5. Present the plan

• Step 5 is Presenting the Financial Planning Recommendations. The financial plan (including alternate plans of action) is presented to the client to explain why the recommended course of action may benefit them over their current course of action. The client needs to feel comfortable with the recommendation and confident in its implementation. 

6. Implement the plan

• Step 6 is Implementing the Financial Planning Recommendations. Implementing recommendations to achieve a client’s goals may include several areas of financial expertise such as investments, insurance, taxes, and estate planning. An advisor and their firm may help implement recommendations in these areas. In addition, the advisor may work with other experts in these areas. The most common area where a Fee-only planner will help is with investments. The key is they will not charge a commission for the investments purchased, as they are compensated only by the fee the client pays. Additionally, a Fee-only advisor may refer a client to a CPA for tax preparation or to an estate attorney for estate planning. A benefit for the client is knowing the advisor will not receive a referral fee from the professional they refer to. The fee for ongoing services being paid to the advisor typically includes maintaining an investment strategy, tax planning, and implementing the estate plan.

7. Monitor and update (ongoing)

• Step 7 is Monitor Progress and Updating. After the financial recommendation is implemented, it is important to monitor the progress of the plan and update it. Oftentimes, a life event can happen like a new child, a drastic change in the stock market, or a disability to a wage-earner in the family, Maybe a client suddenly realizes they are approaching burnout in a career and wants to change careers or retire early. As they say, life happens! By having regular meetings and touchpoints with clients, the planner can stay on top of their situation and determine if or when new courses of action (or course corrections) need to be taken.

A good financial planner is a long-term partner in the client’s financial success. Some people may not need or want a comprehensive financial planning strategy like the process described above, but when it comes to an actual financial plan, these are the principles a Certified Financial Planner will follow.

If this type of financial planning sounds appealing and you require guidance, we are happy to help! For more information on how we can support you and your family, please visit us at www.f5fp.com, or schedule a free consultation.

Here is additional information on fee-only financial planners, and financial plans.

Would You Like More Support?

• Do you have a well-defined Investment Policy Strategy that is used to drive your investments in support of a comprehensive financial plan?

• If not, would you like to partner with someone who is used to helping people get through these struggles and (then, with confidence) implement portfolio strategies in a systematic manner while focusing on your desired outcomes?

If so, feel free to send us an email or give us a call. We’d love to have the opportunity to help you find a bit more peace of mind when it comes to investing.

Photo credit: All images from rawpixel.com