Definition of a Financial Planner


Financial planners play a vital role in helping individuals, families, and businesses navigate their financial journeys, from short-term money management to long-term goal achievement. This article explores the multifaceted world of financial planning, detailing the skills, designations, and considerations that define this profession.

Understanding the role of a financial planner

A financial planner is a knowledgeable professional who collaborates with clients to optimize their potential for meeting life goals through comprehensive financial advice. While some specialize in specific areas such as retirement savings, others adopt a holistic approach that encompasses various aspects of a client’s well-being, including family, career, education, and physical health.

The fiduciary financial planner

Financial planners are fiduciaries, bound by law to prioritize clients’ best interests and abstain from accepting payments from third parties when recommending specific financial products. Titles in this realm vary, with registered investment advisors (RIAs) serving as fiduciaries under the Investment Advisers Act of 1940, providing advice to high-net-worth individuals and adhering to regulations set by the U.S. Securities and Exchange Commission (SEC) or state securities regulators.

The CFP® designation

A certified financial planner (CFP®) holds a widely recognized professional credential, showcasing expertise in financial planning, taxes, insurance, estate planning, and retirement. This designation is granted to individuals who pass the CFP® Board’s initial exams and engage in ongoing education to maintain their skills. CFP® professionals offer comprehensive services beyond investment guidance, including budgeting, retirement planning, education savings, insurance coverage, and tax optimization strategies.

Fee-based vs. commission-based financial planners

Financial planners fall into two categories: fee-based and commission-based. Fee-based advisors charge flat rates for services, either by the hour, project, or assets under management (AUM). While they earn primarily from client fees, they may also receive commissions for certain product sales. Conversely, fee-only advisors solely earn income from client fees, avoiding potential conflicts of interest associated with commissions.

Choosing the right financial planner

Selecting the ideal financial planner involves careful consideration. Interview at least three candidates to determine the best fit. Essential questions to ask include:

  • What are your credentials?
  • Can you provide references?
  • What is your fee structure?
  • What is your area of expertise?
  • Will you act as my fiduciary?
  • What services can I expect?
  • How are disputes settled?

Verify the status of a CFP® by visiting the CFP Board website.

What do financial planners do?

Financial planners assist clients in managing current financial needs and achieving long-term goals. Their scope ranges from comprehensive financial guidance encompassing savings, investments, insurance, retirement, college funding, taxes, and estate planning, to specialized focus areas like retirement or estate planning. Some financial planners sell financial products, while others help clients devise investment strategies and make decisions.

How much does a financial planner charge?

Hourly rates for financial advisors typically range from $120 to $300, while per-project costs vary from $275 to $4,500 or more based on complexity. For instance, college planning packages average $275 to $1,500, while comprehensive financial planning costs between $2,000 and $4,500. Commission-based planners earn from recommended product sales, while fee-only planners solely rely on fees paid by clients.

Financial planner vs. financial advisor

While all financial planners are financial advisors, not all financial advisors are financial planners. Financial planners help clients create comprehensive programs to achieve long-term goals, offering broad financial advice or specializing in areas like investments, taxes, retirement, or estate planning. The broader term “financial advisor” encompasses professionals who provide financial guidance, manage investments, facilitate stock and fund transactions, and assist with estate and tax planning.

Examples of a financial planner

Financial planners come in various forms, each with a unique approach and specialization. Here are a few examples:

Retirement planning specialist

A retirement planning specialist focuses on helping clients strategize and prepare for a comfortable retirement. They analyze current financial situations, estimate retirement needs, and create tailored plans that incorporate savings, investments, and potential sources of income.

Debt management advisor

Debt management advisors assist clients in tackling debt effectively. They develop strategies to reduce and manage debt, create feasible repayment plans, and offer guidance on prioritizing payments to improve overall financial health.

Estate planning expert

Estate planning experts specialize in assisting clients with organizing their assets and creating comprehensive plans for passing on wealth to beneficiaries. They navigate legal and tax implications, ensuring that clients’ wishes are upheld while minimizing potential estate taxes.

Investment portfolio manager

Investment portfolio managers design and manage investment portfolios that align with clients’ financial goals and risk tolerance. They conduct thorough research, diversify investments, and make adjustments based on market trends to optimize portfolio performance.

Insurance and risk management consultant

Insurance and risk management consultants evaluate clients’ insurance needs and help them select appropriate coverage to mitigate financial risks. They assess potential vulnerabilities and recommend insurance products that safeguard against unforeseen events.

Family financial planner

Family financial planners take a holistic approach, addressing the financial well-being of an entire family. They consider the financial needs of each family member, including education expenses, retirement planning, and estate considerations.

Small business financial advisor

Small business financial advisors specialize in assisting entrepreneurs and small business owners with financial management, budgeting, tax planning, and growth strategies. They help business owners make informed decisions to enhance their enterprises’ financial health.

Frequently asked questions (FAQs) about financial planners

Here are answers to some common questions about financial planners and their role in helping you achieve your financial goals.

What is the difference between a financial planner and a financial advisor?

While the terms are often used interchangeably, a financial planner typically offers comprehensive financial advice and helps you create a detailed plan to achieve your long-term goals. A financial advisor, on the other hand, is a broader term that can refer to professionals who offer various financial services, including managing investments, providing retirement advice, and assisting with tax planning.

Do I need a financial planner?

Whether you need a financial planner depends on your individual financial situation and goals. If you have complex financial needs, such as planning for retirement, managing debt, or creating an estate plan, a financial planner can provide valuable expertise and guidance. Even if your financial needs are relatively simple, a financial planner can help you make informed decisions and optimize your financial strategy.

How do I choose the right financial planner?

Choosing the right financial planner is essential for a successful financial partnership. Consider factors such as the planner’s credentials (such as CFP® designation), area of expertise, fee structure, and fiduciary status. It’s a good idea to interview multiple planners, ask for references, and evaluate their track record and reputation before making a decision.

What should I expect during an initial meeting with a financial planner?

During the initial meeting, the financial planner will likely gather information about your financial goals, current financial situation, risk tolerance, and any specific concerns you have. They will use this information to create a tailored financial plan that addresses your needs and objectives. This meeting is also an opportunity for you to ask questions and ensure that you feel comfortable working with the planner.

How do financial planners get paid?

Financial planners can be compensated through various fee structures. Fee-based planners may charge by the hour, by the project, or based on a percentage of assets under management (AUM). Fee-only planners receive compensation solely from fees paid by clients and do not earn commissions from financial product sales. Commission-based planners earn income from selling specific financial products or services.

Are financial planners regulated?

Financial planners may be subject to different regulations based on their credentials and the services they provide. Registered investment advisors (RIAs) are regulated by the U.S. Securities and Exchange Commission (SEC) or state securities regulators. Additionally, financial planners who hold the CFP® designation are required to adhere to the Certified Financial Planner Board of Standards’ ethical and professional standards.

Can a financial planner help with tax planning?

Yes, many financial planners offer tax planning services as part of their comprehensive approach. They can help you optimize your tax strategy, minimize tax liabilities, and take advantage of available tax-saving opportunities. Tax planning is an integral component of creating a well-rounded financial plan.

Key takeaways

  • Financial planners collaborate with clients to optimize their financial well-being and goal attainment.
  • CFP® designation signifies expertise in various financial domains beyond investments.
  • Fee-based and commission-based financial planners differ in fee structures and potential conflicts of interest.
  • Choosing the right financial planner involves thorough interviews and essential questions.
  • Financial planners offer diverse services, from comprehensive financial guidance to specialized focus areas.
  • Costs for financial planning services vary based on factors like complexity and scope.
  • Financial planners and financial advisors serve distinct roles within the financial industry.
  • Examples of financial planners include retirement planning specialists, debt management advisors, estate planning experts, and more.
  • Financial planners can help with tax planning, investment portfolio management, and small business financial advice.
  • Consider your individual financial needs and goals when deciding whether to work with a financial planner.
View Article Sources
  1. Financial Planners –
  2. Personal Financial Advisors : Occupational Outlook – Bureau of Labor Statistics
  3. financial planner –