What Does a Financial Planner Do?

What is a Financial Planner?

Most people think of a financial planner as someone that helps you with investments. A true financial planner, however, is uniquely trained to help understand your complete financial picture. Those that have earned the CERTIFIED FINANCIAL PLANNER™ or CFP® designation have gone through a rigorous process in order to help their clients.  The process to become a CFP® includes training in six areas: general financial planning, retirement, estate planning, taxes, investments, and insurance.

In addition to classes in those six areas, a person must hold an undergraduate degree, have three years of hands on financial planning experience and pass a rigorous comprehensive exam(average pass rate of only 55 to 60%).  CFP® professionals must also adhere to the CFP Board’s code of ethics.  

Simply put, a CFP® acts as a “fiduciary”, meaning they are legally obligated to act in the client’s best interest.  Not all financial professionals hold themselves to this standard.

What kind of help are you looking for?

Picking the right professional to help you is dependent on knowing what you want. If you want to buy life insurance to protect your family, an insurance agent might be all you need. If you want answers to more complex financial questions, you might consider the services of a CFP®. A CFP® can help you determine how to get the most out of your employer’s benefits plan, select the appropriate amount of life insurance or tell you how much and where you need need to save in order to meet your eventual financial independence goals.

How does your professional get paid?

It’s critical that you understand how any financial professional you work with is getting paid. Do they earn a commission? Are they paid for selling a product? Are they paid by you? When you understand how your financial advisor gets paid, you understand their motivation. If your professional is paid through commissions and kickbacks from selling a product, you may not always get the most appropriate product. If however, they receive no compensation from anyone but their clients, their interests become aligned with those they serve.  

Picking the Right Planner for you:

If you’re working with a CFP®, you can be assured that they have a well rounded skillset to help you with a variety  of topics. Many planners choose to specialize in a smaller subset of clients: retirees, public company executives, business owners or physicians. Before selecting a planner, make sure they have experience working with clients similar to you. Modern Dollar Planning was built to serve the needs of young professionals in their 20’s and 30’s.  We are a part of the XY Planning Network, which is a community of advisors that specialize in serving the needs of young clients--a segment that is often overlooked by many financial professionals. Click here to see the XY Planning directory.


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