1. What does a financial planner do?
Well, that depends. Many individuals refer to themselves as “financial planners,” but not all perform true comprehensive financial planning. Investment, insurance, and tax professionals sometimes specialize in certain areas of financial planning (such as retirement planning, estate planning, tax planning, or investment management). A Certified Financial Planner practitioner is qualified to give you comprehensive financial advice as a result of examination, continuing education, board certification, and accumulated experience. In general, individuals who call themselves “financial planners” aim to help you plan for your goals and needs and improve your unique financial situation.
2. What doesn’t a financial planner do?
A financial planner cannot make you a thriftier shopper, a better saver, or help you earn more money. Ideally, he or she will look at your financial “big picture” and help you work to enhance it via money management. Depending on their credentials, they may recommend specific investments, long-run investing strategies, insurance options, retirement planning, risk management methods, and more.
3. Who needs a financial planner?
If you have some significant assets built up (a home, a retirement fund, savings, etc.) and are wondering about how to protect and/or grow those assets, you’re probably ready for a financial planner. If you currently live paycheck to paycheck or have less than $10,000 combined in your savings and/or any retirement accounts, then you’re probably not yet in need of a financial planner. Researching savings strategies and taking a good look at your spending habits is a good place to start building wealth at a faster pace.
4. How much does it cost?
That is a tricky question to answer. The cost of hiring a financial planner can vary depending on who you hire, where they are located, and what type of “fee structure” they use. A fee-only financial planner earns a flat fee, hourly or otherwise, for their services. A fee-based planner generally prefers to charge advisory fees (often .50 percent to 2 percent annually of the assets under management) for his or her services, rather than commissions linked to investments or product sales.
In occasional instances, charging commissions may actually be more cost-effective for you but not as beneficial. A commission-based planner typically receives the total percentage of his or her income in up-front commissions and therefore some may feel they have little incentive to service you on an ongoing basis.
In most cases, your initial meeting with one of these professionals will be free of charge (be sure to ask in advance about this), and you can discuss fee schedules and compensation arrangements at that time.
5. What is a “CFP”?
If you see the designation “CFP” after a planner’s name, you have found a certified financial planner practitioner (alternately called a Certified Financial Planner professional). A CFP has passed a comprehensive examination, amassed three or more years of qualifying full-time work experience, and enrolled in continuing education courses. A CFP practitioner must also adhere to a strict code of ethics as set forth by the CFP board.
Can you claim to be a financial planner without being a CFP? Yes, although it’s important to point out that the field of financial planning remains vastly unregulated–meaning almost anyone can call themselves a “financial planner.” Does that mean a planner without their CFP designation is unqualified? Not necessarily. But if they aren’t certified, you may want to inquire about their experience and training.
6. How do I choose a planner?
In two words . . . ask questions. Ask trusted friends or colleagues for referrals. Sit down with any planner you’re considering and find out how long they’ve been in business, what their credentials are, how they operate, etc. Most important, make sure if and when you hire a planner that your personalities will mesh. This is someone you may well be working with for the rest of your life, so you should choose someone you feel comfortable with.
7. What is so different about a faith-based financial planner?
There is typically a difference between the kind of advice you will receive from a faith-based adviser and that received from any other advisor. When you choose a financial advisor of any discipline, you are looking for several things, most important that your advisor is first and foremost interested in your needs. You want someone who is competent, performs their work with excellence, and has humility and integrity. So, what is the difference between faith-based and non-faith-based advisors? I believe there are some primary differences between any financial planner and a faith-based planner who has a predetermined process of how to incorporate an investor’s faith into their financial plan.
Ultimately as a faith-based investor, you should expect your advisor to give advice that is consistent with God’s Word. This stems from the advisor’s belief that they are handling God’s resources. Scripture contains more than two thousand verses dealing with money and money management. His principles and truth transcend time, income levels, cultures, experiences, tax law changes, market ups and downs, etc. God’s Word is a light that can guide every area of your life including your finances. You should expect a faith-based advisor to be prayerfully seeking God’s wisdom to share with you as they make recommendations relative to your financial situation.
Second, a faith-based advisor should have a worldview or a perspective that is different from that of the typical advisor. This viewpoint is often eternal in its nature and, consequently for the client, helps him or her to actually be a manager of God’s resources. The advisor often facilitates helping a client make financial decisions that have eternal consequences. The faith-based advisor is not necessarily better, but he is different.
The third reason is that the character of a believer in Jesus Christ should be of a higher standard than the character of a nonbeliever. The character qualities of that advisor should be based upon Scripture.
8. How do I find a faith-based financial planner?
The mind of man plans his way, but the Lord directs his steps.
–Proverbs 16:9 nasb
Two organizations that I have researched provide resources, tools, and training for Christian advisors. These two organizations provide leadership, discipline, accountability, and training for financial professionals looking to incorporate their faith into their financial practice:
Kingdom Advisors
www.kingdomadvisors.org
National Association of Christian Financial Consultants
www.nacfc.org
