Everything you need to know about financial planners
- If you want learn how to be good with money, a fee-only financial planner can help.
- Financial planners can organize your overall financial picture, focus on specifics, and offer guidance for goal-setting.
- Generally, it's best to hire a fee-only financial planner. As fiduciaries, they are required to make recommendations in the best interest of their client, and they only earn money from client fees.
- Want help with your money? SmartAsset's free tool can help find a financial planner near you »
- Read more personal finance coverage.
If you want to learn how to be good with money, you should consider meeting with a fee-only financial planner.
According to a Northwestern Mutual survey, people who work with a financial adviser are more likely to know how to balance spending now and saving for later; set specific goals and feel confident that they will achieve those goals; and have a plan in place to weather economic ups and downs.
Here's everything you need to know about working with a financial planner.
What is a financial planner?
Financial planners — sometimes referred to by the catch-all term financial adviser — help clients organize their overall financial picture, focus on specifics, and establish and implement financial goals.
A certified financial planner, or CFP®, has completed college-level coursework in personal finance planning, clocked thousands of hours of financial planning experience, passed a national board exam, and agreed to a high code of ethics and standards. To verify a financial planner's credentials, consult the CFP Board directory.
What does a financial planner do?
A good financial planner should be able to offer guidance on every aspect of your financial situation, including setting up a retirement saving and investing strategy; planning for big expenses, like buying a house or having kids; everyday budgeting and spending; plus tax and estate planning.
Some financial planners specialize in specific areas, like wealth management or retirement planning. Others may prefer to work with younger or older clients, or people in certain professions. Notably, a financial planner can be beneficial to you regardless of your income level.
How much does a financial planner cost?
Financial planners typically charge a flat fee, hourly fee, or if they're handling your investments, an asset under management fee equal to between 1% and 3% of your total assets.
If you're meeting once or twice to create a financial plan or get advice, you can expect to pay anywhere between $100 and $300 an hour. If you're looking for access to an adviser on a rolling basis — i.e. you want help implementing and maintaining your financial plan — you may pay a fixed fee, usually between $1,000 and $3,000.
Keep in mind that prices vary and some financial planners offer customized packages that don't fall into any of the above categories. Many financial planners also offer introductory consultations for potential clients at no cost.
What is the difference between fee-only and fee-based?
Fee-only only financial planners do not get paid commissions and they act as fiduciaries, meaning they are obligated to make decisions in their client's best interest. Their only objective is to provide sound financial advice to the client, who is paying them an hourly fee, flat retainer fee, or asset under management fee.
Importantly, fee-only financial planners cannot accept kickbacks from insurance companies or brokerage firms if that's where their client chooses to put their money — that is a fee-based adviser.
This doesn't mean a fee-based financial adviser will necessarily work against your best interests. It only means that they may be more inclined to recommend products and services for which they get a commission, which may or may not be the best option for your financial planning needs.
Do I need a financial planner?
You don't have to be earning six figures to meet with a financial planner, but you probably don't need one if you just want to know how to invest a few thousand dollars or which funds to choose in your retirement accounts.
If you want to examine your cash flow for ways to save more or implement better spending habits on a larger scale, a financial planner can help.
You may also consider hiring a financial planner if you're too overwhelmed or confused by your money to make big financial decisions, including how to balance multiple financial goals, manage a business, get out of crushing debt, or establish a retirement savings plan. If the alternative to meeting with a financial planner is decision paralysis, you're better off seeking outside advice.
How do I find a good financial planner?
You can search for financial planners in your area using resources like SmartAsset's free SmartAdvisor tool, the XY Planning Network, and The National Association of Personal Financial Advisors.
Once you've found a financial planner to meet with, there are a few important questions you can ask to find out if they're the right person to handle your money, including (but not limited to) the following:
- Are you a fiduciary?
- How much do you charge?
- Do you earn commission?
- What services are included?
- How often will we communicate?
- Can you describe your typical client?
- What is your investment approach?
Want help with your money? SmartAsset's free tool can help find a financial planner near you »
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