About Personal Financial Planners
Personal financial planners help clients with a whole range of matters related to their financial affairs, from budgeting, to debt consolidation, to estate planning and investment management. Because many people place a premium on having knowledgeable financial guidance, financial planners typically earn good salaries, and sometimes even earn incentive fees if they take an active role in making successful investments. Qualifications for financial planners usually include at least a bachelor's degree in business, finance, accounting or economics, and a statutory title like Chartered Financial Planner or Certified Public Account.
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History
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Personal financial planners have become more mainstream in the last 30 to 40 years. Before then, only wealthier private clients used them for accounting, investment advice and estate planning. With the rapid growth of mutual funds and the investment management industry, financial planners have come on the scene to help ordinary people make sense of an increasingly complex financial world, replete with dozens of credit card, mortgage and investment products.
Significance
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Personal financial planners are significant because they assist people in determining what their financial goals are, and how they can reach them. They provide some of the details to fulfill the big-picture vision of their clients, and seek to help them minimize their financial risk before and during retirement. They also strategize with their clients about how to achieve certain goals, or how they'd respond to financial shocks like job loss, death or other unforeseen obligations.
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Function
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The function of a personal financial planner is to help individuals or families achieve their financial goals. To do this, they must have a good understanding of what kind of income their clients have, how much they spend on average, the kinds of investments they have, and how long they would like to work before retiring. Good financial planners understand that the goal of achieving financial freedom is a proverbial moving target, and that frequent adjustments must be made to investments and spending habits to account for changing circumstances.
Warning
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Utilizing a personal financial planner does not guarantee financial freedom. A knowledgeable advisor certainly can help with tax minimization, estate planning and prudent budgeting, but no one has a crystal ball. Investments can lose some or all of their principal, employers can go bankrupt, or any number of expensive health issues can arise suddenly, all severely and negatively affecting a person or family's financial situation. There are also differences in the abilities of financial planners. Some are very engaged, aware and flexible, able to help their clients perform well in changing circumstances. Others are less interested, knowledgeable or competent, and so will probably just recommend canned financial management solutions that might work well in one set of circumstances, and badly under-perform in others.
Misconceptions
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A personal financial planner is not the be all and end all of an person's financial responsibility. An individual should have as much knowledge about their own finances as possible, and then utilize the expertise of a financial planner to augment their drive for financial freedom, not as a replacement for their own engagement. The best relationship between a personal financial planner and client is one of partnership, not dependency.
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