Financial Planners

views updated May 21 2018

Financial Planners

Financial planners are individuals who advise both people and companies about how to invest their assets. Most financial planners are professionals who help their clients with a variety of financial tasks and aids in making investment decisions to plan for the future.

A financial planner, unlike a Certified Financial Planner or Chartered Financial Consultant, is a title that is self-bestowed, it may be used by anyone. As a result, small business owners wishing to hire a financial planner must be diligent in obtaining referrals, checking qualifications and licenses, and inquiring about fees. "The real pros can help you map out a route to goals like retirement and estate planning, asset allocation, and tax and cash-flow planning," Laura Koss-Feder wrote in an article for Money.

A good financial planner will conduct an in-depth interview to gather information about the client's income, expenses, assets, liabilities, future goals, and risk tolerance. Then the planner will use this information to develop a detailed, written financial plan specifically for the client. Financial planners may steer their clients into a wide range of investment products, including stocks, bonds, mutual funds, money market accounts, independent retirement accounts (IRAs), and insurance. In most cases, clients receive monthly or quarterly reports detailing the progress of their investment portfolios.


"There is no shortage of good financial planners, but the challenge is to identify them among as many as 450,000 stockbrokers, insurance salespeople, and outright cranks who claim to be effective planners. Unlike, say, a plumber, hairdresser, or neurosurgeon, a financial planner does not necessarily have to open a book, take an exam, or otherwise demonstrate any competence before hanging out a shingle," Koss-Feder explained.

The first step in finding a good financial planner is obtaining referrals from friends and business associates, preferably those who are in similar financial situations and have similar financial needs. If personal recommendations are not available, trade groups such as the National Association of Personal Financial Advisors, the International Association for Financial Planning, and the Institute of Certified Financial Planners provide referrals for their members.

After obtaining referrals, experts recommend that small business owners interview at least three potential planners before making a decision. It may be helpful to examine financial plans that each planner has prepared for clients with similar circumstances, and to gather information about the problems the planners have solved for other clients. Though it may not be necessary if the referral came from a trusted friend, the small business owner may wish to contact some of these clients directly and ask about the planners' strengths and weaknesses, responsiveness to phone calls, and willingness to explain things. Since financial planners often work with other professionalssuch as attorneys and accountantsthe small business owner may wish to ask for professional references as well.

The next step in hiring a financial planner is to conduct a thorough examination of their qualifications and experience. Experts recommend that financial planners have a strong background in finance, accounting, banking, stock brokerage, or a related field, as well as five years experience. Potential financial planners should also be able to show proof that they are licensed with regulatory bodies. In order to obtain a credential such as Certified Financial Planner (CFP) or Chartered Financial Consultant (ChFC), a planner must pass a series of tests, take continuing education courses, and comply with a code of ethics. In addition, financial planners who provide advice about securities must file a disclosure document known as an ADV with the Securities and Exchange Commission (SEC). They are required to show potential clients part II of this document upon request, which gives information on their educational background, qualifications, fees charged for services, and any business affiliations that could cause a conflict of interest. Although financial planners are not obliged to show clients part I of their ADVs, small business owners may want to avoid any planner who is unwilling to do so, as part I outlines any disciplinary problems the planner has experienced.


The final step in hiring a financial planner is to find out how the planner will be compensatedthrough client fees or brokerage commissions. Fee-based planners charge their clients various fees depending on the type of work they perform. In contrast, commission-based planners do not charge their clients up-front fees, but instead take a commission on the investments they recommend. Commission-based planners generally work with their clients to create an investment plan for free, then charge commissions ranging from 1 percent on money-market accounts to 90 percent of first-year insurance premiums. In some ways, choosing a fee-based planner may seem preferable because it promotes objectivity and eliminates the potential for conflict of interest. But the fees charged can be expensive; according to Koss-Feder, the average fee to create a basic financial plan was over $1,100. "As long as you have confidence in the planner, it really doesn't matter which type you chooseas long as you know how he is making his money," Koss-Feder concluded. The fee structure should always be spelled out in a written agreement.

Until an atmosphere of trust develops between the small business owner and the financial planner, it may be best to start slowly, by investing around 25 percent of assets. The amount can then increase over time if the client is satisfied with the planner's performance. In order to establish a strong relationship with a financial planner, Lorayne Fiorillo of Entrepreneur recommended that small business owners "treat your financial advisor and his or her staff with respect. Don't call your advisor with paperwork questions; that's a job for his or her assistant. If you have a complex question, call when the stock market is closedyour advisor will have more time to talk. Most of all, keep the lines of communication open."


Chatzky, Jean Sherman. "How to Pick a Pro: Financial Planning Works, but All Financial Planners Are Not Equal." Money. 1 December 2000.

Fairley, Juliette. "The Right Choice: Choosing a Financial Planner You Can Trust." Black Enterprise. March 1996.

Fiorillo, Lorayne. "Rope One In: How to Spot the Good, the Bad, and the Ugly When Looking for a Financial Advisor." Entrepreneur. December 1997.

Glover, Hannah. "Comprehensive Financial Plans Falling Short." Money Management Executive. 20 February 2006.

Kahn, Virginia Munger. "Defining, and Finding, a Fee-Only Planner." New York Times. 12 January 1997.

Koss-Feder, Laura. "Smart Ways to Find a Financial Planner." Money. March 1997.

Nissenbaum, Martin and Barbara J. Raasch, Charles L. Ratner. Ernst & Young's Personal Financial Planning Guide. John Wiley & Sons, 17 September 2004.

Stovall, Robert H. "Selecting a Financial Planner." Sales and Marketing Management. February 1998.

                               Hillstrom, Northern Lights

                                updated by Magee, ECDI

Financial Planner

views updated May 18 2018

Financial Planner

Education and Training: Varies—see profile

Salary: Median—$62,700 per year

Employment Outlook: Very good

Definition and Nature of the Work

Financial planners help individuals and groups plan the use of their savings, income, and investments. Some are self-employed consultants who offer workshops that teach people how to analyze their own financial situations. Other financial planners operate financial planning businesses or are employed by insurance companies and financial institutions—savings and loan companies, investment services companies, and banks—to sell their company's financial products. Such products might include family budgeting schemes, mutual funds, individual retirement accounts (IRAs), insurance, real estate, or tax-sheltered investment plans.

Financial planners help individuals examine their immediate and long-term financial situations. The job of the financial planner is to help each investor decide what kinds of investments are best. They advise people on what types of investments to put their money in as well as the timing of major expenditures, such as buying a house or starting retirement.

In order to be effective, financial planners must be familiar with legal restrictions and laws concerning retirement plans, tax shelters, insurance, and trusts. They must be skilled at working with numbers and budgets and be able to understand complicated financial and legal documents. In addition, they should be articulate, persuasive, and have sales ability to build a clientele. Financial planners are also sometimes called personal financial analysts, personal financial advisers, or financial consultants.

Education and Training Requirements

The majority of workers in this occupation are college graduates. In fact, a growing number of colleges offer programs specifically for financial planners. Although few employers require such specialized academic training, it is helpful to take courses in marketing, accounting, business law, economics, and financial and estate planning. In preparing to become a financial planner, a person must have good math skills and the ability to work with budgets and accounting systems.

The Certified Financial Planner (CFP) Board of Standards offers a CFP credential for people who have some experience in financial planning. To acquire a CFP, a candidate must pass an examination that covers subjects such as financial planning processes, insurance and risk management, and taxes and retirement planning. Although the CFP designation is not needed to become a financial planner, it is helpful for advancement, especially for someone working for a big investment firm.

Many financial planners obtain additional training in insurance, stocks and securities, taxes, or banking, depending on their special field. Those interested in working with securities often seek certification from the National Association of Security Dealers. Some states have bonding and licensing requirements for people who work in stocks, bonds, and securities. Individuals should contact their state government for specific requirements that may apply to financial planners.

Getting the Job

The best way to get a job as a financial planner is to apply directly to the company or financial institution for which you would like to work. Newspaper classified ads and ads on the Internet may also offer job leads. Private employment agencies that specialize in placing workers in the field of finance may also list openings.

Advancement Possibilities and Employment Outlook

Financial planners can advance by expanding the areas of their expertise and thus increasing the range of financial services or products they handle. In some companies advancement to positions of greater responsibility depends on the financial planner's ability to generate high commissions. Some planners open their own financial planning businesses. Financial planners also might advance by becoming licensed as securities brokers.

According to the U.S. Bureau of Labor Statistics, personal financial planners held 158,000 jobs in 2004. Employment of financial planners was expected to grow at a faster rate than that of all occupations through the year 2014. The increasing number of investment alternatives and continuing changes in tax laws should lead to high demand for people employed in financial planning. As the baby boomers reach retirement age, more and more will be turning to financial planners to secure their financial future. The turnover rate is high, however, owing to the competitive nature of work in this field. Many beginning financial planners fail to establish a sufficiently large clientele and leave the field.

Working Conditions

Financial planners work in offices and in the field, either alone or in teams. They may hold financial planning workshops with local community groups or at adult evening schools. Some financial planners meet their clients at their homes or businesses.

Financial planners sometimes work more than forty hours per week, especially in the beginning when they are trying to establish a clientele. Some financial planners work evenings and weekends to meet with clients.

Where to Go for More Information

American Academy of Financial Management
2 Canal St., Ste. 2317
New Orleans, LA 70130

Certified Financial Planner Board of Standards, Inc.
1670 Broadway, Ste. 600
Denver, CO 80202-4809
(303) 830-7500

Financial Planning Association
1600 K St. NW, Ste. 201
Washington, DC 20006
(800) 322-4237

Earnings and Benefits

Earnings of financial planners vary widely depending on their experience and the services they perform. Financial planners who are self-employed may charge a flat fee based on a percentage of the value of their client's investment. Fees are also sometimes negotiated on an hourly rate. Many financial planners who sell financial products are paid primarily on a commission basis. Some receive supplementary salaries that vary depending on the employing company. The median annual salary for financial planners was $62,700 in 2004, according to the Bureau of Labor Statistics. Experienced financial planners earned $108,280 or more per year. Some financial institutions and insurance companies offer benefits that include paid holidays and vacations, health and life insurance, and pension plans.

Financial Planner

views updated May 18 2018

Financial Planner

Financial planners help individuals and businesses invest money. They provide financial advice based on their knowledge of tax and investment strategies, stocks and bonds, insurance, retirement plans, and real estate.

Financial planners interview their clients to help them define their financial needs and goals and to determine how much money clients have

available for investment. Whether the goal is long-term investing (for example, retirement) or short-term investing, financial planners use information provided by a client to develop a financial plan tailored to the client's needs. Additionally, a financial planner often sells stocks, bonds, mutual funds, and insurance.

Financial planners can work for credit unions, credit counseling companies, banks, and companies that specialize in offering financial advice. The vast majority of financial planners have bachelor's or master's degrees. A college degree in business administration or finance is useful.

Financial planners often use mathematics on the job. They calculate which proportion of a client's money may go into a particular investment. For example, does the client want half of his money to be invested in stocks and half in real estate?

Financial planners review stocks and bonds to determine which have the best profits. For example, a stock that is bought for $10 a share and becomes worth $15 a share shows a 50 percent return on the investment. They must calculate how much a purchase of multiple shares of a stock will cost. Four shares at $20 per share will cost $80.

For long-term investments, a financial planner may need to calculate compound interest. He or she must project and add all the investments over time to assess if enough money will be available for the client's retirement.

see also Economic Indicators; Stock Market.

Denise Prendergast


Career Information Center, 8th ed. New York: Macmillan Reference USA, 2002.

Internet Resources

Occupational Outlook Handbook, 20002001 Edition. <>.

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