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What is a financial planner?

Financial Planner definition

Planning for your finances can be a complicated task. For this reason, knowing what a financial planner can do for you in this particular field can help you in case you are struggling to improve the way you manage your money.

We can define a financial planner as a professional who has the knowledge and training required to guide a person in the process of managing his/her money adequately.

These professionals often come from a financial background and they are typically accredited by a local institution to perform their services.

Additionally, a financial planner’s meaning also takes into account that a fiduciary duty exists with the client, which means that the planner must act in the client’s best interest at all times.

What does a financial planner do?

The primary role of a financial planner is to help individuals in achieving their financial goals.

This is accomplished by analysing the person’s current financial, employment, and personal situation along with their risk tolerance, to determine the best courses of action to achieve their objectives.

Some of the areas that are commonly covered by a financial planner include:

  • Retirement planning: this involves helping a person in defining the steps required to build a retirement fund.

  • Estate planning: wealthy individuals typically require the services of a financial planner to find an optimal structure for their assets for taxation and succession purposes.

  • Taxation matters: a financial planner can provide advice in regards to the best courses of action to save money on taxes in a legal and transparent way.

  • Wealth management: individuals with a high net-worth typically require tailored advice to adequately manage their finances.

  • College planning: parents will often turn to financial planners to set up a fund to cover their kid’s future college expenses.

  • Insurance: insurance is an important part of how individuals protect their assets from negative unforeseen circumstances. A financial planner can provide advice in regards to the best products available for the client’s needs.

Financial planners typically charge an hourly fee for their services or they could also charge a percentage-based fee on the amount of assets that they will be overseeing.

It is important to note that financial planners should disclose any potential conflict of interest emerging from a relationship with a service provider that they tend to recommend.

The role of a financial planner

Does a financial planner require accreditation?

Due to the potential conflicts that can arise from the relationship between a planner and certain service providers – e.g. insurance companies, asset management firms, etc – most countries require that financial planners obtain a credential before they can start offering their services to individuals.

In the United States, only Certified Financial Planners (CFP) and other accredited professionals in the financial industry can provide formal advice to individuals in regards to their money-management decisions.

The actions and decisions of these professionals must adhere to the guidelines and ethical standards set by the organisations that provide these credentials, and their licenses can be revoked if their practices fail to meet these strict standards.

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