What does a financial planner do?

By Louise Chan

October 24 2018
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Financial planners are trained professionals who structure reasonable programs to help their clients achieve their financial objectives by managing their money better.

Mid to low-income individuals may fail to see the importance of financial planners due to misconceptions about what they do and the fees they charge.

But working with financial planners may prove more beneficial to individuals who need more control over their finances. Here’s why.

Difference between financial adviser and financial planner

Financial planners are a type of financial adviser but financial advisers don’t have to be financial planners.

Financial advisers can be considered as an umbrella term for trained, licenced and certified professionals who are allowed to give advice on financial matters such as money management, retirement, insurance and taxation.

Many professionals holding an Australian Financial Services (AFS) licence can call themselves financial advisers, and the long list includes stock brokers, insurance brokers, real estate agents and lawyers.

Financial planners may offer financial and/or investment advice, depending on their specialisation and qualifications, but they are not necessarily the same as financial advisers. However, they require rigorous training, a recognised professional certification and continuing education to practice their profession.

The most recognised registered certification is the Certified Financial Planner - CFPⓇ from the Financial Planning Association of Australia (FPA).

What financial planners do for their clients

Financial planners have a fiduciary duty to act in the best interest of their clients. This means they must focus on providing appropriate advice according to their clients’ circumstances and needs, regardless of the simplicity or complexity of the services they are asked to provide.

The duties and responsibilities of a financial planner extend beyond simply planning and managing their client’s finances. They offer a range of advising services, which include:

Answering financial questions
Advising
Debt management services
Broking (i.e., loans, real estate)
Retirement planning
Estate planning
Creating a financial roadmap for specific goals (i.e., education, inheritance)
Tax planning
Investment asset recommendations
Managing client portfolios

What fees do financial planners charge?

The fees that clients pay usually depends on the number and complexity of service they require and the financial planner’s fee structure. There is no standard fee for financial planners; however, they are required to disclose all the fees they charge so that their potential client can make an informed decision.

There are three ways financial planners get paid for their advice: fee-only, commission-only and fee-and-commission.

Fee-only planners receive income solely from their clients, and they may charge a standard rate, an hourly rate, a percentage of the managed assets or based on their performance.
Commission-only planners receive income solely from successful transactions. They receive sales commissions from institutions that offer the products they recommend clients.
Fee-and-commission planners charge according to their rates and receive commissions from the products they successfully sell clients.

While financial planners have a fiduciary duty, individuals who choose either a commission-only or fee-and-commission planner may have to determine if the products being recommended are also sales pitches.

Do I need a financial planner?

It’s always recommended to seek advice from licensed professionals who can take the individual’s circumstances into consideration in their advice. However, it is still up to the individual if they will employ the services of a financial planner.

Individuals must first assess their current financial position and goals and determine if they can truly make it on their own. At the very least, they may consult a financial services officer who can offer advice for free to get them started.

Explore Nest Egg for more information about professionals who can help with your financial planning.

About the author

Louise Chan

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise Chan

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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