Many people still believe that financial planners are for the wealthy. This is why many fail to use them simply because they don’t want to pay any extra cost. Making financial plans requires an expert, that is someone with a good knowledge of finance. Before a plan or a goal is accomplished, it requires determination and discipline. If you choose to be your financial planner, you might not be able to follow your plans thoroughly. For this reason, it’s preferable to choose an expert in this field. It is better to choose a financial planner (though it might be a little bit on the high side depending on your portfolio) but it’s worth the expenses. The extra cost shouldn’t be your first concern when considering a financial planner, rather the first question you should ask yourself is can I not afford to have a financial planner?
For clarity purposes, you don’t need to be rich to have a financial planner. Sincerely, not everyone needs a financial planner, says Tom Gehrmann – Colorado Springs. But if you feel your portfolio needs proper direction and guidance, you can opt for one. Because a good financial plan that is well-executed results in a better outcome. A well constructed financial plan allows you to be on track and gives you the ability to oversee your investment, profits and money spent. To help you understand the role of a financial planner, let’s consider who they are, what they do, various types and payment options.
Financial Planners And What They Do
A financial planner is a financial expert that helps you meet your financial needs and long term financial goals as they come up with strategies to accomplish those goals. They help assist in various ways ranging from saving for retirement and investing to funding a new business, college and maintaining wealth. They are considered fiduciaries meaning they are bound legally to act in the best interest of their clients.
Types of financial planners
Financial planners can be categorized into three types based on how they are paid namely percentage-based, fee-based and fee-only financial planners.
Percentage-based financial planners
For this type of financial planner, they charged based on percentage. They collect a certain percentage depending on the assets they are managing. In most cases, they work with clients that have at least million-dollar assets in their portfolio and charge from 0.5% to 2%. Considering this type of planner might seem expensive but they will work to ensure the growth of your assets and investments since they collect a percentage based on the value of your assets.
Fee-based financial planners
They charge a flat rate for their service which can be based on the project, the assets they manage or hourly. So primarily their income is from what their clients pay them. They can sometimes also earn through commission when they sell certain financial products. It is advised to use them for certain services since they charge a flat rate so you don’t have to worry about paying hourly. For individuals with simple financial situations who can easily manage their finances or those that just need general financial advice, the hourly financial service will be cost-effective.
Fee-only financial planners
When you compare this type of financial planner to the other two listed above it will cost you a lot more for upfront payment.
Advantages of financial planners
They help manage your retirement plans
They help manage reimbursement of complex student loan
They can help you with estate management
They help to ensure that you have savings for your children’s college fees
They can be involved when your partner dies or is disabled
They also can be of help when you earn an inheritance
During a divorce phase, a financial advisor can be involved
If there is an IRS audit, financial advisors are of importance.
Can I be my financial advisor?
Definitely, Yes. Everyone can be his or her financial advisor but not everyone succeeds in it. To be a financial advisor requires time and much attention. From taking care of your investment, and making sure they fit into your goals, to constant reviewing and ensuring course corrections. All the above-mentioned details are what a financial planner does. The question you should ask yourself is, do I have the time for this? Will I be able to meticulously do all the above? If Yes, then you can go ahead, but if No, you can go ahead to employ a financial planner.
Is getting a financial planner expensive?
Financial planner fees vary from person to person. It all depends on what they offer or are capable of doing.
Some might be costly while others might be cheap.
Above all, get a financial planner who will at least give you the value of the money you are paying.
Creating a financial plan is very crucial. Almost everyone has a laid down goal and objectives. But following these laid down plans closely is where the problem lies. At this juncture, is where a financial planner comes in. They make sure your plans and goals come into reality thereby resulting in greater achievement.
Have you been longing to have a good financial planner? Are you in doubt about whether or not to engage a financial planner? Tom Gehrmann is an independent business consultant based in Colorado Springs, Colorado. He has a long history of leading businesses to success.
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