What Does a Financial Planner Do?

It’s no secret that most Americans are stressed about inflation, and many live paycheck to paycheck, even while earning six-figure salaries. Whether you’re worried about saving for a mortgage down payment or don’t know if you’re saving enough for retirement, a financial planner can help. These professionals aim to create customized plans for their clients to reach large and small financial goals. They can offer investing and tax preparation advice, retirement planning, estate planning, and more. 

Like any professional, they’re prepared with expertise and experience beyond what you’ll find with an internet search or a book. Read on to understand what does a financial planner do and how they can help you with your financial goals. 

Understanding How a Financial Planner Works

A financial planner works to assess your current financial situation, understand your goals and create a customized, actionable plan to reach those goals and improve your financial well-being. As each individual and family has a unique financial picture, financial planners create plans tailored to your unique needs and circumstances.

If you hire a financial planner, they can also help you analyze your assets, liabilities, income and expenses to create realistic targets. Whether you're considering buying a new home, investing for retirement, saving for your children’s college education or purchasing life insurance, a financial planner can help.

Financial planners can help you:

• Identify financial goals
• Understand your financial health and create steps to improve it
• Build a retirement plan
• Create an estate plan
• Consider insurance options
• Optimize tax planning
• Create a customized savings and investing plan that takes into account multiple goals

What Does a Financial Planner Do?

If you want to understand more deeply what a financial planner can do for you, consider the following nine services they commonly offer to answer the question, "what does a financial planner do day to day?"

1. Financial Assessment

A financial planner starts by evaluating a client's overall financial picture. This process includes examining income, expenses, assets, liabilities, investments, insurance coverage and tax obligations. They analyze financial statements and gather relevant information to understand the client's financial health.

2. Goal Setting

A financial planner helps set short-term and long-term financial goals based on the client's aspirations. These goals can include retirement planning, saving for education, buying a house, starting a business or achieving a certain level of financial security.

3. Financial Planning

Once the goals are established, the financial planner develops a comprehensive financial plan. This plan outlines strategies and recommendations to achieve the goals while considering factors like risk tolerance, time horizon and cash flow management. It covers areas such as budgeting, investment management, tax planning, estate planning, insurance coverage and debt management.

4. Investment Management

Financial planners help clients create investment portfolios that align with their goals, risk tolerance and time horizon. They provide guidance on asset allocation, diversification and selecting appropriate investment vehicles such as stocks, bonds, mutual funds or real estate. They may monitor the performance of investments and make adjustments as needed.

5. Retirement Planning

A significant part of a financial planner's role is assisting clients in planning for retirement. They help clients estimate retirement expenses, evaluate existing retirement accounts and develop strategies to accumulate sufficient funds for retirement. This process may include recommending retirement savings vehicles like 401(k) plans, IRAs or annuities.

6. Tax Planning

Financial planners provide guidance on tax-efficient strategies to minimize tax liabilities and maximize after-tax returns. They stay updated on tax laws and regulations and recommend strategies such as tax deductions, credits and tax-efficient investment options.

7. Estate Planning

Financial planners help clients create estate plans to ensure the orderly transfer of assets to beneficiaries that minimize estate taxes. Considering the client's wishes and family dynamics, they may collaborate with estate planning attorneys to establish wills, trusts and powers of attorney.

8. Risk Management

Financial planners assess clients' insurance needs and provide recommendations on appropriate coverage, such as life insurance, health insurance, disability insurance or long-term care insurance. They help clients understand potential risks and develop strategies to protect their financial well-being.

9. Monitoring and Review

Financial planners regularly review and monitor the progress of their client's financial plans. They reassess goals, adjust strategies as needed and provide ongoing guidance and support. They may also provide education and information on financial matters to help clients make informed decisions.

Financial Planner vs. Financial Adviser: The Main Difference

Financial planners and financial advisers may offer many of the same services, including advice on investments, taxes or strategies to reach financial goals. In many cases, financial advisers focus on investment portfolios and long-term investment planning, while financial planners take a look at the entire financial picture and an individual's long-term goals. 

As the names imply, one offers overall planning while the other offers advice or direction. However, the lines are blurry, and both types of professionals may have the same certifications. 

Look for financial planners or financial advisers with the credentials of CFP (Certified Financial Planner), CFA (Chartered Financial Analyst), ChFC (Chartered Financial Consultant), CPA (Certified Public Accountant) or RIA (Registered Investment Adviser). You can also learn more about the difference between a CPA and CFP to choose a professional with the right credentials for your needs.  

With a wide range of credentials available, it's important to ask for references and understand the types of clients and scope of advice each professional usually offers. Be sure to also ask about their fee structure, as finance professionals may charge an hourly rate, a flat fee or a percentage of assets under management (usually 0.5% to 1.02% or less).

What Can a Financial Planner Do for Me?

If you find yourself asking, "what does a financial planner do that I can't?", you're not alone. A financial planner isn't for everyone. You can create a solid retirement and savings plan with research and education. However, if you're faced with complex situations or want to optimize savings, these professionals can help. 
A financial planner can create a personalized strategy to reach your financial goals faster, create a solid investment plan or ensure you're not missing opportunities to save on tax incentives. Consider even an hour-long consultation to see whether their advice is worth the fees.

Frequently Asked Questions