You may be wondering “what exactly does a financial planner do and why should I hire one?”
The short answer is, a financial planner will help you lead the best life possible with the money you have.
Before we take a more in-depth look at what a financial planner does, let’s define what financial planning is.
What Is Financial Planning?
Financial planning is the process of clarifying your most important lifetime goals and mapping out a plan to use your financial resources to maximize the likelihood of achieving those goals.
What Does A Financial Planner Do?
Unfortunately, financial education is completely lacking in our education system, leaving most people without the knowledge required to do their own financial planning. That’s where a financial planner comes in. A financial planner can guide you through the financial planning process and help you develop a plan to achieve your goals.
Here’s how they do it:
They Clarify Goals & Attitudes
Before a financial planner can make recommendations, he or she must understand what you’re trying to accomplish with your money.
A good planner should get to know you as a person, learn about what’s important to you, and understand your attitudes about investing. They need to understand your unique situation in order to determine the right approach to help you reach, and sometimes exceed, your goals in life.
They Evaluate Your Current Financial Status
Once a financial planner understands what you want to accomplish, he or she has to get a clear picture of your current financial situation. To do this, he or she will gather information about:
- Your assets and liabilities
- Your sources of income
- How much you’re currently spending vs. saving
- Any special circumstances (special health issues, dependent adult child, etc.)
By looking at these items, the financial planner is able to get a better understanding of your finances and your means to achieve your financial goals.
They Create A Financial Plan
With the foundational understanding of where you are now and what your ideal future looks like, your financial planner will develop a plan to bridge that gap. Here are some of the key questions that should be answered by your financial plan:
- How much do I need to save while I’m working?
- What type of investment account should I contribute to?
- When can I retire?
- How much can I spend in retirement?
- How much can I safely withdraw from my investment portfolio in retirement?
- What types of insurance do I need? What types do I not need?
- How should I invest my money?
- When should I claim Social Security?
They Present Recommendations & Alternatives
With the plan completed, a financial planner should review the plan with you, gather your feedback, and potentially modify the initial plan based on your feedback.
Many financial planners will include alternative scenarios to illustrate the impact of altering key planning assumptions such as savings rate, target retirement age, target retirement spending, or portfolio asset allocation. Viewing these alternative scenarios allows you to analyze the tradeoffs involved in financial planning so that you can select the plan that you’re most comfortable with.
They Implement Recommendations
Once you both agree on a plan and finalize the details, your advisor will help you determine the steps to get everything set up and begin implementing your plan.
This typically involves setting up investment accounts, transferring assets, and managing your investment portfolio to keep aligned with your plan.
They Monitor & Adjust the Plan
After your financial plan is established and implemented, your financial advisor shouldn’t be a stranger. Life will inevitably present you with surprises and challenges that will require you to adapt your initial plans.
A good planner will provide ongoing advice, monitor the status of your plan, adjust the plan when necessary, and remain your trusted advisor for decades. You want to be comfortable with the team responsible for your financial well-being, and the team at Ruedi Wealth Management invests in ongoing relationships because it helps keep you invested in your financial plan and working towards your goals.
It’s always helpful to have someone in your corner to help you figure things out when life presents its inevitable challenges.
How much does it cost to work with a financial planner?
Before you begin your financial planning journey, make sure your planner explains their fee structure and the deliverables you can expect to see throughout the process.
Ruedi Wealth Management is a fee-only Registered Investment Advisor, which means we don’t get paid on commission. Instead, we charge a percentage of the assets we manage for clients.
But, there are a number of other fee structures that financial planners work with such as:
- Hourly rates
- Commissions
- Flat up-front fee
- Annual retainer fees
It’s important to understand all the costs associated with hiring an advisor and what they are doing to add value to your life.
Financial Planners: Your Partners in Financial Success
Partnering with a financial planner allows you to spend your time enjoying your dream retirement instead of worrying about your finances. A good financial planner will provide you with confidence that your finances are being managed effectively and you are doing everything you can to live the lifestyle you’ve always wanted.
