When it comes to managing your finances, you might be inclined to take matters into your own hands, but working with a professional can help you see your personal finances through a different lens. Planners can determine your major areas of improvement and create a plan to help you efficiently manage your finances so that you can tick off all of your financial milestones.
It’s important to know that you don’t need to have an astronomically high net worth to work with a financial planner. Whether you’re building an empire or a modest emergency fund, a financial planner can help you set goals and make a plan for hitting those goals according to your preferred timeline.
“From layoffs and pay cuts to hospital bills, many financial situations can prompt a need to think about your finances and get your money organized,” says Diane Bourdo, certified financial planner and president at the Humphreys Group. "One smart step toward financial preparedness is to work with a financial adviser.”
What exactly does a financial adviser do?
A financial planner’s job is to create a roadmap for their client that helps them create a more stable foundation in the short-term that, in turn, supports their long-term goals. Note: not all financial advisers are certified financial planners.
To become a certified financial planner, you must meet the following requirements:
- Experience requirement: Complete either 6,000 hours of professional experience related to the financial planning process, or 4,000 hours of apprenticeship experience.
- Education requirement: Meet certain educational requirements which includes completing coursework on financial planning through a CFP Board Registered Program, and holding a bachelor's degree or higher (in any discipline) from an accredited college or university.
- Exam requirement: Then you have to pass the actual CFP® exam, which is a 170-question, 6-hour exam broken up into two sections.
- Ethics requirement: Finally, you must commit to CFP Board to act as a fiduciary as the last step in the process, which means acting in the best interests of the client at all times when providing any financial advice. You must also commit to other high ethical and conduct standards and will need to disclose information about your background, and the CFP Board will conduct a detailed background check.
A few key ways that a certified financial planner can help you get your finances in order:
- Income planning and management
- Investment planning
- Risk management and insurance planning
- Tax planning
- Retirement planning
- Estate planning
When does it make sense to meet with a financial planner?
Meeting with a financial planner regularly can help you establish healthy financial habits and keep you accountable to your goals. Although, there are major life events that may prompt you to seek out a certified financial planner for guidance on how to move forward. These life events events may include:
- A job loss, promotion, or major career transition
- A recent engagement, wedding, or divorce
- Receiving an inheritance
- Expanding your family
- Starting your own business
- Entering into retirement
Still, many planners recommend that individuals begin working with a financial planner early on in their income-earning years. If you haven’t yet worked with a financial planner, you don’t have to wait for a major life event to happen to do so.
“Regrettably, most people don’t start working with a certified financial planner until there is an "event" in their lives, like getting married, having a child, getting divorced, changing jobs, buying a house and more,” says Carol Petrov, certified financial planner, CPWA®, and Vice President at Kendall Capital Management in Washington, DC. “It’s best to start as soon as you can. Certified financial planners are trained to help people—especially people who are good savers—to strategize to meet multiple financial goals. Starting early gives you a strategy to follow as your income and your assets build and grow.”
How much does a financial planner cost and how do I find one?
The amount you can expect to pay to work with a certified financial planner or financial adviser will range widely across the board depending on the services provided, frequency of those services, how the planner charges, and more.
“Advisers who sell financial products get paid a commission on each transaction. Fiduciaries who sell advice are paid a percentage, typically 1% to 1.5% of the value of a client’s portfolio,” says Petrov. “There are also financial planners who will charge a fee just for the financial plan or charge an hourly fee if you need advice on a particular goal or to update an existing plan. Those fees can range from a couple hundred dollars per hour to thousands of dollars for a one-time comprehensive plan.”
But the good news is there are several ways you may be able to have one-on-one time with a financial adviser at a lower (or in some cases zero) cost.
- Check your benefits plan at work: Your employer may offer financial planning services as part of your benefits package.
- See if you qualify for pro-bono services: Organizations like the Financial Planners Association (FPA) and the National Association of Personal Financial Advisors (NAPFA) offer personalized financial planning advice to thousands of qualifying consumers across the country—free of charge.
- Start with a free consultation: Some financial planners may offer a free initial consultation to lay the groundwork for your long-term financial plan. This won’t cover everything you’ll need to set all of your goals in motion, but it can answer some of your questions and give you a sense of whether or not this specific planner is a good fit for you.
The takeaway
Your financial plan will likely involve quite a number of moving parts. As you continue to earn more money, build wealth, accumulate or pay down debt, and face new circumstances that challenge your financial plan, working with a trusted financial planner can help keep you centered and on track to meet your goals.
