What does a Financial Planner do?
A lot of people are interested in getting help with their finances, but don’t know where to start. An important first step is to understand the difference between an Accountant (also known as a Certified Public Accountant, CPA) and a Financial Planner (also called a Financial Advisor).
An easy trick to differentiating the two professionals is this: when you think Financial Planner, think “planning for your future”. When you think Accountant think, “counting” or “recording information.”
A Financial Planner is an investment professional who can help you meet your long-term financial goals. An accountant, on the other hand, is more likely to help you with an immediate need such as filing your taxes.
There is some crossover in their roles, but in general your accountant is going to organize, record and file existing data, while a financial planner helps you create financial stability – grow your wealth – through investments, savings and smart money management.
How do I find a Financial Planner I can trust?
There are two questions that you need to answer (1) How do I find a financial planner and (2) How do I know I can trust him/her?
These are extremely common (and important) questions. Firstly, know that you have not been left out of any loop. With so many people claiming to be financial planners, advisors, counselors, it’s difficult for anyone to discern whom to trust.
The National Association of Personal Financial Advisors has a thorough downloadable PDF called “Pursuit of a Financial Advisor, How To Guide”. Just keep in mind that they are marketing on the behalf of their constituents, not their constituent’s customers per say. It’s still a very informative and educational piece.
But knowing how to find your planner doesn’t solve your trust problem. To find help that you will trust we recommend – word-of-mouth. Ask your father, sister, colleague…post the query on Facebook. Finding a source that is somehow connected to your community provides a peace of mind beyond knowing their credentials and resume.
Regardless of how you came about finding your help, make sure your Financial Planner has the appropriate credentials. You should also interview several candidates to compare not only styles, but differing answers to prepared questions.
These are the credentials you are looking for:
– Certified Financial Planner (CFP)
– Personal Financial Specialist (CFP/PFS)
– Chartered Financial Consultant (ChFC)
Lastly, all the advice points to only working with Financial Planners who charge a Flat Fee. Hourly or Commission fees are not advisable as a general rule.