What Does a Financial Planner Do?

Picture of a financial planner using oranges as binoculars.

I am a financial planner. My primary job is to look into the future and make a plan that shows you the decisions that you can make that will help you achieve long-term financial success.

It is amazing how many of my friends still don’t know what I do for a living. Many of them still think I sell stuff – investments or insurance or something. Sometimes I think it would be easier to explain if that is what I did.

I understand why my friends think all financial planners sell stuff. Of the 350,000 financial planners in our country, the majority of them (over 90%) receive commissions in one way or another from products that they sell.

Although I don’t receive commissions from selling investments or insurance products, I do sell. I sell advice. That advice helps people make smarter financial decisions. In a nutshell, financial planners answer questions.

How Financial Planners Answer Questions

Financial planners gather information and financial statements and put the information into software that projects the results far into the future. These projections are used by the financial planner to answer questions such as:

  • How much should I be saving?
  • What investments are best suited to provide the income I need?
  • How can I protect my savings against a bad market?
  • Should I use my extra money to pay off the mortgage, or put more into my 401k plan?
  • How much income will I have in retirement?
  • Should I keep the life insurance policy I’ve had for thirty years?
  • How will inflation affect my retirement lifestyle?
  • What should I be doing with my money so it can take care of me one day?

Some of these questions are not so easily answered. Looking thirty years into the future can be a rather daunting exercise. The key is to accept that we are working with a lot of moving parts. You have to play with the parts that move and create “what if” scenarios. These scenarios help you see what your finances will look like five, ten, or twenty years into the future.

Financial Planners Help You Focus

Once you have a financial projection, you have to forget about the things you have no control over (like what did the stock market do today) and focus your energy on the things you can control. Here are some ways a financial planner can help you focus on the things that will make a difference.

  • Worried about losing your job? You can save extra money in an emergency fund so if that happens you have plenty of time to regroup.
  • Worried about inflation? Social Security provides lifelong inflation adjusted income and you can often get more in benefits than you might think by doing a bit of analysis and strategically deciding when each spouse should begin taking benefits.
  • Worried about the investment markets? You can choose safe, guaranteed investment choices, or use a time-segmented approach to investing so you don’t have to worry about the inevitable ups and downs in the markets.

What a good financial planner does is facilitate conversations about all of these items. They provide objective advice and educate you about the choices available to you. A good financial planner does not start off by showing you a brochure about an investment.

Bottom line, the type of financial planning my firm offers falls more along the consulting lines. I hope one day, all financial planning falls along those lines.

To start your search for a financial planner see Top Ten Tips on How to Find a Financial Advisor.

To learn more about what a financial planner can do for you, see another article of mine, What Will a Good Financial Planner Do For Me?

Written by Dana Anspach.