In today’s uncertain economic times, it is very important that you take control of your finances. However, many folks lack the expertise necessary for creating a viable financial plan, sorting through thousands of potential investment opportunities or making sure they have a balanced portfolio.
The good news is that you don’t have to fly solo. Financial planners can help you create a plan for managing your money so that you meet your long-term financial goals. The bad news is that financial planning does not come cheap.
If your finances are pretty simply, hiring a professional financial planner probably won’t be worth the cost. But if your money matters are more complex, you might find the expense is well worth it in the long run.
What a Financial Planner Can Do for You
Financial planners help their clients develop well-balanced investment portfolios. They look at existing retirement and investment accounts and create a portfolio appropriate for both the client`s age and risk tolerance.
A financial planner can also give you a realistic estimate of how much retirement savings you’ll need to maintain your current lifestyle. They can show you where to invest so that you maximize returns while you are still young, but then how to shift your money into less risky investments when you get closer to retirement age.
Financial planners also help clients rearrange their finances so they can save up for a child’s college education or a new home. Some planners specialize in helping you save money on your taxes, suggesting investment options that will legally limit what you owe the government at year’s end.
Estate planning can be a complicated financial affair and many individuals turn to financial planners for estate planning advice. They can help you create a will and later help your loved ones avoid paying taxes on the inheritance.
Choosing a Financial Planner
Anybody can legally call themselves a financial planner. Fortunately, credentialing programs exist to help you find a planner with training and experience. Look for a planner with the professional designation of Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA). Verify credentials before you hire a professional planner.
Interview several potential planners to find out more about their education, training, skills and services. Make sure you find one with a personality that meshes with yours as well. It’s very important that you feel comfortable with a financial planner so that you trust their advice.
The Cost of Financial Planning
While the cost of planning varies according to the planner and your personal financial situation, you will likely face one of three billing structures.
You pay fee-only financial planners just for the advice they give you. Some charge an hourly rate, others a flat fee and still others an annual retainer. These professionals don`t earn any commissions from selling you financial products such as mutual funds or insurance.
A fee-based planner earns advice-based fees plus commissions on any financial products they sell you. The commission-based financial planners earn a percentage from whatever financial products they sell you. Keep in mind that commission fees can add up very quickly.
Your chosen financial planner should give you a written agreement that clearly states all of the services that shall be provided and how much it will cost you. Make sure that the planner outlines how they will help you pay off debt or save money.