What are the Duties of a Financial Planner

A financial planner is a professional who helps us with our financial issues. He is of great help in areas such as personal financial planning, investment planning, risk management, and insurance, as also in cash flow management. Here we take a look at the duties of financial planners and their job responsibilities.

Duties

He provides his clients with valuable guidance in taking major financial decisions and informs them about the short-term and long-term consequences of the same.

He helps the clients assess their financial assets, determine their financial goals, and weigh their economic resources to take investment decisions.

The duties of a financial planner also include the setting of financial goals with the client, gathering the client’s financial information, analyzing it, and designing a financial plan for him. It is a financial planner’s duty to implement the planned financial strategies and monitor the client’s financial decisions.

A financial planner helps the clients in risk management by assisting them in choosing suitable insurance schemes. He helps them plan for the future by providing them with well-suited investment options. He helps the client ensure financial independence on retirement, by helping him choose the proper retirement investment plan. He advises the client on how to reduce his tax liabilities and enhance cash flow. A financial planner also deals with the conservation and distribution of the financial assets of his client.

Job Description

A financial planner studies the different aspects of the financial status of his client and provides a suitable solution for existing and potential financial problems, if any. Some financial planners deal with the various facets of personal finance, while others specialize in fields like risk management or retirement planning.

The job of a financial planner can be described by means of a 6-step process given by the ISO.

– The first step is of setting financial goals with the client.
– The second step includes gathering relevant financial information from the client.
– The third step is of analyzing the gathered information.
– This is followed by the creation of a financial plan.
– The last two steps include tasks such as implementing the plan’s strategies and monitoring the implementation of that plan.

Financial planning is one of the most speedily growing industries as it deals with managing the most important means of living – money.

Choosing an Investment Advisor

Investment advisors provide advice to their clients on securities. In other words, they are individuals who specialize in advising people on investing in mutual funds, bonds, stocks, commodities, or real estate. Some advisors also manage their client’s portfolio of securities.

How are They Different from a Financial Planner?

While most financial planners are also investment advisors, all investment advisors may not be financial planners. Financial planners generally assess all aspects of a client’s financial needs such as estate planning, retirement, taxes, insurance, investments, and savings, and help in developing a financial plan or strategy for meeting his or her financial goals. On the other hand, investment advisors restrict themselves to providing advice on investing in an asset that is likely to generate good returns, or give regular income and/or dividends.

Why do People Need an Investment Advisor?

While most ordinary investors are intelligent people, with many of them being quite well-versed with the market, yet, they are often not very successful with their stint in the market. And that is quite understandable. After all, they make their living doing something else, hence, they do not have the expert knowledge that a professional would have. For example, if you were to fall ill, you would seek the expert help of a medical professional, even though you may be knowledgeable about various health related matters, or you would go to an auto-mechanic if your car had a break down, even though you may have a pretty good idea about cars.

Most ordinary people have a tendency of being ‘off’ in the timing of their investment. For instance, they buy when the market is high and not during the low periods. But to get the best returns on investment, it should be the other way round. The trouble is that most ordinary investors are influenced by factors like media hype, fear, and greed.

It’s here that a professional financial advisor can provide them the correct advice on how, when, and where to invest their money. However, make sure to hire a registered professional, who has a proven track record of successfully investing in securities or other assets.

What Services do They Provide?

Basically, they do all the legwork such as the research and analysis. Also, more importantly, their primary focus is kept on the market, particularly in the area of their specialization.

Since most of their energy and time is spent in researching, deliberating, and analyzing, it is natural for them to have a better sense of the market, along with its movements, compared to ordinary investors who cannot expend this kind of time and attention to it. They usually recommend the best products in the market, and those which suit the client’s needs and financial capacity.

Before hiring any financial professional, it is important for you to be cognizant about what kind of services you require, what he or she will deliver, if they have any kind of restrictions on what they can recommend, what services will you be paying for, their cost, and how they get paid.

How are They Paid?

Let’s look at some of the ways in which the advisors are usually paid:

– A fixed amount that both you and the advisor agree to.
– A commission based on the securities that they sell.
– A percentage of value of the financial assets that they handle for you.
– A combination of any of the above.

Each of these payment methods has its pros and cons. Find out from them about the nuances of each, and which would be most suitable for your needs. Lastly, check if the fees are negotiable.

Making that Decision

If you make a cursory search on the Internet, you would discover that there are innumerable registered advisors in the United States. However, not all of them maybe good, so how would you ensure choosing the right one? Well, most large-sized brokerage agencies maintain a list of investment advisors that they work with, including information about their past performance. However, this resource is not foolproof, since they have a tendency of recommending people who do their business through the agency, or buy products of their firm. Hence, you will have to be careful about conflict of interest issues.

Another way is to subscribe to any of the database services, which provide information as well as rankings, too, on such professionals. However, these services can be quite expensive.

Provided below are few of the factors that need to be kept in mind when hiring one:

– Make a verification of their record, taking into consideration their past performance.
– Check out their strategy to see if it will work in different market conditions.
– As much as possible, find out about their business operation.
– Check if the agency has any regulatory problems.

Apart from the above, you should also make sure that you can trust the advisor with your investment choices, and build a good rapport with him or her.