What is a financial planner and what do they do?

Financial planner

A financial planner as the name suggests works as an advisor and works with clients to help them manage their finances and their financial goals. Deep knowledge of personal finances, taxes, budgets, and investments is required to be a financial planner/advisor.

The financial planners are experts in tax management, allocation of assets, management of risk, retirement planning, estate planning, etcetera.

Financial planners advise on several matters and help their client’s in matters related to investing, saving for retirement, education-related funding, and new business management. Financial planners generally hold a professional designation to qualify for the job role.

What is a financial planner and what do they do

A better understanding of the role of a financial planner

A financial planner collaborates with its clients and knows in detail the whereabouts of the financial condition of the client. Some financial planners are specialized in a particular area such as taxes or savings but many financial planners provide a wholesome package related to the finances of their clients.

The Fiduciary financial planner

Financial planners are fiduciaries, meaning that they are bound in legal terms to work in a client’s best interests and cannot accept money from a third party while working with a client.

These financial planners are managed by the securities and exchange commission. To be an effective financial planner one needs to have proper education, training, and experience to provide/recommend specific financial products to its clients.

Fee-Based vs. Commission-Based financial planner

Fee-Based financial planners charge a rate on an hourly or day-to-day basis. Their income comes majorly from clients’ payments for their services.

Commission-based financial planners earn their money mainly from selling financial products such as bonds, credit cards, etcetera. Many companies pay commissions to financial planners for selling their products to clients.

What do Financial planners do?

A financial planner works the management of the financial needs of their clients. These financial needs can be current money needs and to reach the goals of long-term financial goals.

Some financial planners help their clients with several financial needs such as savings, taxes, retirement plans, and estate plans. Insurance policies, tax savings, bank account openings, bonds, etcetera are some of the products sold by financial planners.

Licensing, regulations, and self-regulation of a financial planner

Many countries require no legal framework, and anyone can use the term, financial planner.

Many institutions provide licenses to individuals wanting to become financial planners such as Professional financial analysts (PFA), Certified financial planners (CFP).

The holders of these designations are certified and legal and are bound to follow the rules and regulations of the concerned authorities.

A certified financial planner is self-regulated and works in the best interests of its clients. They know a good amount about the financial whereabouts of their clients and they are bound to not disclose these pieces of information to the competitors or other third parties.

What is the difference between a financial planner and a financial advisor?

A financial planner is also a financial advisor, but all financial advisors cannot be financial planners.

A financial planner’s job is to help their clients manage their financial condition by advising them, and providing them with necessary financial inputs whereas a financial advisor can be anyone who advises their clients related to their finances.

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