What is Financial Planning?

Financial planning entails evaluating financial resources and obligations to make smart decisions regarding spending, savings, and investments. This includes financial analysis, the observation of financial data such as budgets or checking accounts to understand how a business or client uses its financial resources.

At the corporate level, a financial plan or analysis may evaluate business trends and help companies identify areas of business growth or evaluate the return on specific investments. This analysis also identifies areas where individuals and organizations can make changes in spending to improve their bottom line.

Financial planning also asks individuals and businesses to set goals for their future. These goals could require only a few years to complete, such as saving for a down payment on a house or paying off student loans. Long-term goals, like saving for retirement, also need frequent monitoring to ensure individuals stay on track with their aim. Individuals or companies may use investment analysis to find stocks or bonds that help their savings grow over time.

What is a Financial Planner?

While personal financial analysis helps individuals make smart decisions for spending and saving, many people seek out the expertise of a financial planner. These professionals can take on the daunting task of organizing finances and choosing wise investments. They also help families protect their assets through appropriate insurance products and estate planning services.

Financial planners may also go by the title personal financial advisor, financial consultant, wealth manager, or personal banker.

This exciting career continues to see strong growth as potential clients realize the importance of planning carefully for their future. The U.S. Bureau of Labor Statistics (BLS) projects a 15% increase in employment of personal financial advisors, including financial planners, from 2016 to 2026.

This guide reviews the duties of a financial planner, the education and preparation necessary to find employment, and industries hoping to attract new financial planners to their ranks.

What Does a Financial Planner Do?

Financial planners help their clients develop short-term and long-term financial goals and develop strategies to accomplish those goals. They may work with young families, individuals nearing retirement, small business owners, or entrepreneurs. Because each client has unique goals, the financial planner must develop individual plans of action.

Financial planners counsel and advise their clients on investment opportunities and other major financial decisions, like purchasing a home, developing a budget, or paying down debt. They help plan for the future through insurance products and estate planning. They may also provide guidance on personal taxes, such as possible deductions or tax-advantaged investment opportunities.

Financial planners may also go by the title personal financial advisor, financial consultant, wealth manager, or personal banker. Some titles require an individual to earn state or federal licensure, such as registered representative or investment advisor representative.

Other titles require voluntary certification from professional organizations. The certified financial planner title, for example, requires passing the Certified Financial Planner Board of Standards criteria, documenting at least three years of full-time work experience, and agreeing to follow a professional code of conduct. Other common certification titles include chartered financial analyst and personal financial specialist.

Financial planners must understand the principles of financial analysis. They need to be comfortable with complex mathematical calculations and industry software that helps them develop economic forecasts. These tools allow financial planners to better advise their clients on where to invest their funds or manage any changes to their portfolios. Computer skills in spreadsheets, database management, accounting software, and document management software can help financial planners stay organized and complete their work.

Financial services is a highly regulated field. Clients place their faith and trust in financial advisors and expect them to act ethically and legally.

They also need excellent communication skills. These professionals often interview clients to understand their needs and goals and determine their risk tolerance. Their observations and conversations will guide the development of a client's investment plan. Financial planners also need to communicate complicated information to clients who may not have an in-depth understanding of financial analysis. Often, financial planners communicate with monthly reports on investments. These reports must be easily understood by clients and provide the information they need to make good investment choices.

Financial services is a highly regulated field. Clients place their faith and trust in financial advisors and expect them to act ethically and legally. For example, financial planners should make sure their clients understand if services include commission or fee payments. Financial planners must gain specific licenses before offering investment products. The exams required for these licenses ensure financial planners understand their legal and ethical responsibilities. Continuing education or professional memberships can help ensure financial planners understand any changes to laws, as well.

Most financial planners work full time in an office environment, but they may work nights or weekends to accommodate their clients' schedules.

Financial planners may work in large corporations that specialize in securities and commodities. This industry accounted for 51% of financial planner jobs in 2016. Other financial planners operate independent offices. In these offices, the financial planner must also take on marketing and networking responsibilities. They may charge a fee for their services or collect commissions on investments. Most financial planners work full time in an office environment, but they may work nights or weekends to accommodate their clients' schedules.

Self-employed financial planners may complement their services with tax preparation, insurance services, or small business bookkeeping services. Often, the needs of the client can drive the services offered. Some financial planners choose to specialize in serving a specific niche. Personal bankers and wealth managers offer many of the same services as financial planners, but they often work in retail banks to help customers with services such as loans, certificates of deposit, or checking accounts. Wealth managers typically serve clients with high net worth.

What Are the Responsibilities of a Financial Planner?

Client Interviews

Before financial planners can develop an appropriate financial plan for a client, they need to understand the client's current financial situation, future goals, and comfort with risk. The interview allows the planner and client to ask questions. The financial planner must use active listening skills and observational skills during this interview.

Financial Assessment

Financial planners must use a variety of documents to determine their client's current financial status. Reviewing bank statements, current investments and balances, credit card statements, and loan agreements can help develop a reasonable and workable budget. It also helps professionals develop investment and savings plans.

Investment Research

Financial planners must carefully track financial markets to look for trends and forecast performance. Individuals offering stocks or other investments also review quarterly financial reports from companies in their portfolio. Several software applications help financial planners complete financial analysis, including Finance Logix Retirement Planner, Oracle Financials, and WealthTec Foundations.

Portfolio Management

Financial planners often manage multiple investments across different sectors. These investments may include stocks in individual companies, bonds, or commodities. The financial planner must evaluate how each investment performs to determine the right mix of high-risk and low-risk investments.

Client Communications

Financial planners regularly update their clients on investment performance. They may also include reports on progress toward a certain goal and track the client's debt payback and net worth. Clients may find financial topics difficult to understand. The financial planner must explain complex data and analysis in a clear and accessible way. Clients may also become scared during a market downturn. The financial planner should be on hand to explain what has happened and how it affects their investment plan.

Networking

Financial planners may need to conduct networking and marketing to meet new clients. Methods could include hosting educational seminars on retirement planning, attending meetings of local civic and business associations, or developing informational blogs for a website. Financial planners who own an independent financial planning office must plan for advertising and new client acquisition costs and activities.

What Qualifications Do You Need to Become a Financial Planner?

Education

Bachelor's Degree You need a degree in accounting, mathematics, economics, finance, or a related field to prepare for this career.
Internship Usually completed in the final year of a bachelor's program, this experience allows students to use the skills and knowledge acquired throughout their program in a real-world setting.
Professional Licensure Most states require an individual offering insurance products to complete a training program and pass an exam. If you offer investment products, you must pass multiple tests, such as the Series 65 exam for investment advisors.
On-the-Job training Many financial planners work under the supervision of a veteran advisor to learn how to build client networks and develop investment portfolios.
Professional Certification Professional certifications require passing an exam, agreeing to a code of ethics, and documenting 3-5 years of work experience.
Graduate Degree Some companies may require earning a master's in accounting, finance, or business administration for career advancement.

Skills

Analytical Skills Financial planners must take information from a variety of sources, such as market trends and regulatory changes, to develop a client's investment portfolio.
Communication These professionals must communicate verbally and in writing with clients, often relaying complex information.
Decision-Making Financial planners must evaluate the risk and reward of potential investments in order to advise their clients.

Abilities

Reasoning Financial planners must possess the ability to take complex information and draw conclusions.
Reading Comprehension These professionals often need to understand information in written form to fully grasp the scope of a client's needs.
Organization Financial planners must possess the ability to devise systems for finding information as needed and completing tasks on schedule.

Knowledge

Financial Analysis These professionals need a thorough understanding of the principles of accounting, economics, and complex financial calculations.
Customer Service Financial planners must communicate regularly with clients and appropriately assess their needs.
Administration Management These professionals must understand basic business principles, demonstrate leadership, and appropriately allocate office resources.
Industry Software Financial planners use many different types of software for financial analysis, client management, and database management.
Learn More About How to Become a Financial Planner

How are Financial Planners Employed?

  • Brokerage Firms

    Financial planners in these firms sell securities and investment products to their clients. They may receive a commission on these sales, which can impact their annual salaries. The securities and commodities industry employs 51% of personal financial advisors, with a median annual salary of $129,950.

  • Credit Intermediation

    These companies work with consumers to develop plans to pay back debt. Financial planners may help individuals develop budgets and negotiate settlements with creditors.

  • Banks

    Banks offer multiple investment products, including certificates of deposit and money market accounts. Financial planners may promote these products to clients. They may also suggest other banking products, such as checking accounts or loans.

  • Insurance Companies

    Financial planners in insurance companies assist individuals with retirement and estate planning. They may offer products such as annuities and life insurance.

  • Self-Employed

    The BLS reports 24% of financial planners own their own investment businesses. These professionals must take on marketing, advertising, and office management responsibilities, but enjoy greater flexibility on their products and services offered. Many may specialize in a specific niche, such as retirement planning.

Learn More About Financial Planners and Take the First Step Today!

Professional Organizations for Financial Planners

  • Association for Finance Professionals This organization administers certifications for treasury professionals and corporate financial planners and analysts. Members enjoy access to networking and professional development activities, such as the annual conference that draws more than 7,000 finance professionals each year. The organization maintains a career center that connects employers to potential applicants.
  • Chartered Financial Analyst Institute The CFA Institute administers the chartered financial analyst certification, which requires four years of documented work experience. Members receive access to competency-based professional education sessions. The career center offers a virtual networking site, exclusive job listings, and access to career coaches.
  • Financial Planning Association The association offers individual memberships to students, professionals, and faculty, as well as group memberships to businesses and organizations. FPA seeks to connect early-career financial planners with mentors through online communities, in-person meetings, and annual conferences. The association also offers continuing education and access to industry information through a monthly journal.
  • National Association of Insurance and Financial Advisors This organization advocates at the state and federal levels on issues that impact the insurance and finance industries, such as tax issues. Monthly online meetings bring together professionals across the country and, with an industry expert speaker, also provide continuing education credits. Members can obtain a listing in the consumer directory and access to a virtual library of practice management resources and tools.
  • National Association of Personal Financial Advisors Membership requires signing a fiduciary oath and following the organization's code of ethics. Fee-only financial advisors may join, while students and teachers can become affiliate members. The registered financial advisor category requires obtaining advanced education, completing a sample plan, and undergoing a peer review.