Financial Planning 101: The Ins And Outs Of Working With A Financial Planner

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Reaching your financial goals can be a seemingly unending journey. Just as soon as you successfully squirrel away some funds into your savings account or finally pay off that credit card debt, another financial obligation rears its ugly head and you’re once again coughing up the cash. These struggles are exactly why many people turn to professionals for help.

Financial planners have the role of advising their clients on the best ways to save, invest, and grow their money. These planners won’t waste your time with trying to eliminate the small stuff, like telling you to not buy the average 9-ounce cup of coffee, but will instead focus on tackling major financial goals or investments. These can include anything from buying a house to saving a certain amount for retirement.

As these planners will have a large hand in your financials, you want to ensure that the processes of finding a planner and working with them go as smoothly as possible. Let’s dive into the most important things you need to know about working with financial planners.

With all of the world’s information available on the internet, it may seem pointless to pay someone to advise you on your finances. However, about 63% of high net worth investor respondents see high or very high value in an advisor who personalizes their advice. You certainly won’t find that personalization by just looking up listicles online.

When working with an experienced financial planner, you can develop a plan to address areas of financial concern such as retirement, insurance, and estate tax. They can also coach you when difficult financial situations arise and help you avoid costly mistakes. For instance, if you’re planning to relocate and know that this year you’ll be among the average 45 million people who move annually, your advisor can help you navigate the home selling and buying process and with transferring your assets.

If you’re considering working with a financial planner, be sure that they have the right industry credentials. The most important credential is the Certified Financial Planner (CFP) designation. Earning this title takes hundreds of hours of studying and training, three years of qualifying full-time work experience, and passing a comprehensive exam.

You should only work with a financial planner who is a fiduciary. This means that the planner has pledged to act in their clients’ best interests. Any investment professional who is not a fiduciary is held to a lesser standard, know as the sustainability standard. According to this measure, your planner simple needs to provide you with advice and plans that are suitable for you, but not necessarily in your best interest.

You should handle your relationship with your planner in the same way you handle any of the relationships in your life. The first step is clear and open communication. As you start your business relationship with your planner, be clear about what exactly you are getting from them and how payment for it will work. Some less-than-reputable planners will offer their clients low-cost plans that don’t offer much in order to entice them into purchasing even more expensive and unnecessary services.

For a healthy relationship with your planner, you will also need to manage your expectations about investment returns. As the market is constantly changing, performance is never a guarantee. You should also avoid working with planners who promise certain performance numbers because of this. While they can advertise an average return on investment (ROI), any specific promise means that they aren’t operating in the industry the way that they should. This works much the same as in the construction industry. A contractor could advertise that a minor kitchen remodel has an average ROI of 82.7%, but any guaranteed ROI on their part would be suspicious, as a contractor cannot control the actual amount of money you will see from the remodel.

Working with a financial planner can be a great way to optimize your investments and ensure that you’re doing everything you can for your financial well-being. Just keep a keen eye out for potential scammers and those who aren’t in the business to truly help their clients. With this caution in mind, you’ll be ready to tackle your financial future head-on.

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