Hiring a Financial Planner – Basics, Benefits And Tips

Financial planning is more than just financial assistance, support or any sort of advice. It is actually the process of setting financial goals and making a plan on how to achieve them. But do you need a financial planner? We've summarized the basics of hiring a financial planner, the benefits, and important tips. Here is is:
Hiring a Financial Planner - Basics, Benefits And Tips

Do you need a financial planner?

Nowadays, it’s no easy task to manage your money. The world has become so complicated with so many processes we don’t understand that the support of a qualified professional is essential for our survival. Most probably you have come across various terms – financial advisor, planner, manager, etc. – and feel slightly confused.

I understand why some people prefer to do their financing on their own – it’s difficult to find someone you can trust, and also it costs money. On the other hand, financial planners are able to significantly improve your financial planning as well as provide you with invaluable tips on how to make smart investments. This article will focus on the basics of financial planning and how to choose a good financial advisor.

What is a Financial Planner?

Financial planning is more than just financial assistance, support or any sort of advice. It is actually the process of setting financial goals and making a plan on how to achieve them. This plan consists of steps a person needs to take if they wish to succeed.

Successful financial planning requires a good financial planner. If you don’t find one, most probably you won’t achieve the desired results. A professional knows their game.

You have to be careful when choosing one, though. If he starts promoting financial products or investments at your very first meeting, the things are not ok. The first thing planners do is to collect the necessary personal and financial information. Based on them, the planner can make predictions and start advising you.

Planner, Manager, Adviser – What’s The Difference?

I know that it’s rather confusing. Financial planner, financial advisor, financial manager, what is the difference? Is there any at all and are they the same thing?

Even though some believe there are differences, these roles are pretty much the same. Well, of course, they have their differences, but all doctors are doctors regardless of their specialization, right?

We can simply assume that a financial planner or advisor is a person who helps you to achieve future financial goals. It could be related to your retirement or simply investment in the stock market. What’s more, they can help you manage your money and therefore benefit from it by making profitable investments.

What Does a Good Financial Planner Do?

Let’s now go into some more detail. What are the financial advisor’s responsibilities and what do they actually do for you? What are the things that your advisor should do:

Understand your financial status

The first thing an advisor, a good one, will do is to assess your current financial situation. Without this, no further talks will be profitable for you. Before they start making recommendations they need to know where you stand at the moment.

Most probably the advisor will give you a questionnaire to fill in. Your answers will give him an idea, and then you can move on to the next steps.

Educate you

Your planner will play a very important role since they will be your “money” teacher. They will explain to you many things related to money management, spending, investment opportunities.

For instance, they will give you precious advice on how much money you need to put into an account for retirement purposes. Or, they will touch on the topic of insurance giving you the best choice for your needs. They will also educate you on the topics of taxes and property management.

Change your spending habits

This is very important. A good planner will talk about your spending habits and give you some nice tips on how to minimize your spending.


Think that way. What you actually do together is business. You are partners and both are trying to make the best out of it. Don’t expect them to do everything, you have to be an active part of the whole process.

A good financial planner will…

  • Tell you how much you need to save for retirement
  • Advise on the different types of retirement plans (for example, 401k, IRA)
  • Give you precious advice on your loans and specifically your mortgage if you have one; they will also tell you whether to pay it off or refinance
  • How to change your spending habits
  • Tell you more about the different type of insurance, especially if it concerns life policies
  • Help you understand your taxes better and improve your situation
  • Show you various investments and the risks associated with them; make you understand what’s best for you and help you make the decision yourself
  • What returns to expect in the short- and long-run from your investments
  • How much money to put aside in case of an emergency.

Things to Consider When Hiring a Financial Advisor

Before hiring a financial planner, keep those important things in mind and consider them carefully.

Don’t Have the Same Interest

Even though financial advisors have to make a decision that will benefit you as a client, this is not always the case. Imagine the planner earns a commission from products or services he sells. Do you think he won’t try to sell them to you and earn a nice amount of money himself? I would recommend you use a fee-only planner rather than a salesperson.

Perhaps, it would be a good idea when you meet with your planner to try to understand how they are compensated. That will reveal a great deal of information. Sometimes your advisor might consent to become a fiduciary. This means that by law he has to protect his client’s interest and make decisions that will benefit them in the first place.

 Higher Fees 

That’s a serious problem. If you don’t invest a large amount of money and hire a professional, you might end up paying more in fees than making a profit from the investment. If your portfolio is not diverse and huge, then certainly you won’t be able to make lots of money.

Don’t be afraid to invest small amounts of money in different assets and ventures without the assistance of a professional. This will show you and teach you precious lessons which you can use in the long-term.

Many Alternatives

Nowadays, the Internet is an endless source of information. Having a financial advisor, a good and reliable one, is an expensive thing. On the net, you can find some much cheaper alternatives such as Motif and Personal Capital. You surely know that they are not free of charge. Despite this, people can afford them more easily. What’s more, you will actually have a more active role in your own budget, finances and investing program.

How Much Do You Have to Pay?

As previously mentioned, the costs sometimes might be higher than the actual return. Therefore, you need to know exactly how much this financial assistance will cost you. Usually, an individual financial plan will cost between $1000 and $2000.  That’s only for the initial plan; expect to pay other fees if the planner continues to work with you in the future.

Keep in mind that financial planners will help you improve your spending habits and money management as well as advise on investment opportunities.

Unlike planners, most financial advisors actually promote investment products. Their fee is usually a percentage of the money you have invested in an asset. Normally, the fees you have to pay is annual and is between 0.5% and 1.5% (of course, they could be higher). The more money you invest, the less you will have to pay. For instance, if your advisor charges 1% and you invest $100,000, the annual fee is $1,000.

Conclusion: Do You Need a Financial Planner?

Now you know a lot more about financial planning than in the beginning. You know what it is and what it involves as well as the role of any financial planner. You have to decide whether you need one or not.

In most cases, hiring a financial advisor will prove to be a smart decision. However, given the fact that sometimes they try to sell you different products so that they can earn a commission or another reason, it won’t be justified to use the services of one. Below you can find four questions to ask yourself before meeting with one:

  • Are your finances in a mess? If everything runs smoothly, why would you give money to someone?
  • Do you have money to invest? Not only money but enough money. If the amount is very small, don’t bother; hiring a professional will eat away your returns.
  • What do you want to achieve? What are your expectations? Do you want to save for your kid’s college fees or you want to become a millionaire?
  • What are your retirement goals? Do you want to retire early and want to travel around the world? How do you see your life after retirement?