What Does a Financial Planner Do?

Dana Anspach

May 4, 2018

I am a financial planner. I own and run a financial planning firm. Our primary job is to make a projection and a plan that shows you the decisions that you can make that will help you achieve long-term financial success. Should you pay extra on the mortgage or put it in your 401(k) plan? What type of insurance do you need? Should you refinance? Buy that stock or use a mutual fund instead? We have answers to these questions. 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 into the future. By running multiple “what if” scenarios the financial planner can identify the set of decisions that results in a better outcome for you. These projections and comparisons are used by the financial planner to answer questions such as:

  • How much should I be saving?
  • What investments should I be in?
  • 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 401(k) plan?
  • How much income will I have in retirement?
  • Should I keep this life insurance policy?
  • How will inflation affect my retirement lifestyle?
  • How much can I withdraw this year?
  • When can I retire?

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 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 if you’re married you can often get more in benefits than you might think by 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.

Do Financial Planners Sell Stocks and Insurance?

After twenty-plus years of being a financial planner, I’ve realized that when people ask me what I do for a living, when I answer that I’m a financial planner, most people still think I sell stuff – investments or insurance or something. I understand why so many people 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 they sell.

There are a group of financial planners, about 10% of the industry, that don’t sell stocks or any products. They may manage investments on your behalf, but they are not paid by selling you an investment. This type of financial planner is a “fee-only financial planner” or “no commission planner.”

Financial Planners May Have Specialties

Our area of expertise is planning for people age 55 and older who are within ten years of their desired retirement age. We work with people all over the country by using web-based technology and screen-sharing. Some planners focus on helping people fund their children’s retirement. Others focus on retirement plans for businesses. And others focus on doctors or dentists or helping young families start a savings plan. It’s important to ask a financial planner to describe their typical client. Work with a planner who specializes in working with someone like you. If you’re near retirement and want to learn more about what a financial planner can do for you, download our free report 10 Worst Money Moves for Near Retirees.

To learn more about what to look for in a financial planner see Top Ten Tips on How to Find a Financial Advisor.

This introduction to financial planning is a lot to take in. You probably have many more questions about retirement planning. If you want to learn more, check out the Control Your Retirement Destiny podcast (particularly Episode 1 – “Why it’s Different Over 50”) on either iTunes or Podbean.

Written by Dana Anspach.