If you’re thinking about looking for a financial planner, you may be wondering what exactly a financial planner does and what value he or she can bring into your life. The answer I give when people ask me what a financial planner does is, “I help my clients clarify financial goals and reach them reliably.” That sounds pretty good, but what does it mean?
Generally, I would explain it like this:
- I help clients get specific about the financial goals they want to bring about. A common example would be: I want to retire from work and live off my savings at age 60.
- Then we work together to understand what will be needed to make the goal work. In the example above it might include:
- Money for health insurance for five years until you qualify for Medicare insurance.
- Savings to provide $5,000 in spendable money per month.
- I make projections to determine how much money will be needed to meet the targets we just identified.
- We then discuss risks that might prevent this plan from working and look at ways to manage that risk. For this part, we often using life insurance and long-term healthcare insurance.
- I create a savings and investment plan to accumulate the necessary funds.
- After we review the details and agree, I then implement the plan to begin saving the money so you will be ready when you get to be 60.
Financial planning areas of advice
Another answer is to look at the services you can expect to receive from a CERTIFIED FINANCIAL PLANNER™ professional. CFP® professionals have extensive training, experience and on-going education focused on six key areas of financial life:
- Cash flow and net worth assessment. How are you doing? Are you getting ahead or falling behind?
- Risk management and protection strategy. Are there risks that could derail your financial goals? Do you have a good plan for managing these risks?
- Investment planning and wealth accumulation strategy. Are you using all the tools available to save money and grow it effectively?
- Retirement income planning and wealth distribution strategy. Where will you get your retirement income? Will it keep pace with your growing needs? Will it last as long as you do?
- Tax planning. Are you doing everything you should to reduce the taxes you pay on your income and on your investments?
- Estate planning and wealth transfer strategy. Do you have the necessary documents in place so that your affairs can be handled in the event you can’t act on your own behalf? Do you have a plan to transfer your estate to the next generation efficiently?
Ongoing financial planning
An example of what a family could expect to receive over the course of a year from a holistic financial planner is as follows:
| · Financial planning services. Current goals, mid-term goals, retirement goals and forecasting. | Annual review and update |
| · Extended planning and risk management. Insurance needs assessment, planning and implementation. | Annual review and update |
| · Investment management. Personalized allocation, monitoring and rebalancing. | Annual review; weekly monitoring |
| · Communication. Quarterly update reporting and annual in-person reviews. | Annual review; quarterly reporting |
| · General advisory services. “Second opinion” service to evaluate opportunities or challenges. | As needed |
Financial goal planning
The tangible deliverables you will receive from a financial planner are only part of the process.
Remember that financial planning services really deliver their value over time. The process of moving toward your goals is a gradual one. The creation of a plan document and an initial meeting to discuss the details of the plan is only the start. Think of your financial plan document as the blueprints for your dream retirement life. The printed plans are essential, but you need to build the financial goal “house” to truly get the value from the planning process.
A great financial planner is a partner in the execution of your plan over time. Periodic check-ins and annual reviews and updates are essential to be sure everything is on track.
If you think you might want to talk with a financial planner, you can locate a CFP® professional near you here.
As you visit with financial planners, I suggest a couple things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor only paid by clients, not any financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
A fiduciary, fee-only, CFP® professional can help you make great financial planning choices and develop a holistic financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I only work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their financial plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.