The old saying, “If you fail to plan, you plan to fail,” is a philosophy with many applications. Perhaps nowhere does it apply more, though, than to personal finance. Financial planning takes into account myriad factors including taxes, saving and investing. A financial planner is a professional who helps people to create a plan for their financial future. To find one to help you, use SmartAsset’s free financial advisor matching service.What Is Financial Planning?
Financial planning is the practice of putting together a plan for your future, specifically around how you will manage your finances and prepare for all of the potential costs and issues that may arise. The process involves evaluating your current financial situation, identifying your goals and then developing and implementing relevant recommendations.
Financial planning is holistic and broad, and it can encompass a variety of services, which we detail below. Rather than focusing on a single aspect of personal finance, it views clients as real people with a variety of dreams, goals and responsibilities. It then addresses a number of financial realities to figure out how best to enable people to make the most of their lives.
Financial planning is not the same as asset management. Asset management generally refers to managing investments for a client. This can include choosing the stocks, bonds and mutual funds in which a client should invest their money. However, the same professionals who offer asset management services can also offer financial planning. A financial planner is effectively one type of financial advisor. Advisors can earn advanced certifications focused on financial planning, the most notable of which is the certified financial planner (CFP).What Services Are Included in Financial Planning?
A financial planner may offer a variety of services to you. These services will often be considered in concert with one another. This helps the planner to put together an overall plan that considers all aspects of your situation and helps you achieve your goals.
Here are some of the services that you’ll frequently see offered as part of financial planning:
The exact services offered by a financial planner will vary based on the individual. Make sure your planner offers the services you need.How Much Does Financial Planning Cost?
The cost of financial planning depends largely on the advisor you work with and that advisor’s fee schedule.
Many financial advisors who offer financial planning services will do so on either a flat fee or hourly fee basis. A flat fee means you’ll pay a single fee for all financial planning services. Your total fee will likely depend on the value of your assets under the advisor’s management as well as the complexity of the financial planning services you require. An hourly fee structure means you’ll pay a set fee for each hour of work that your advisor puts into your plan.
A financial advisor who offers both financial planning and investment advisory services may charge a wrap fee. This means you pay one fee for all the services the advisor offers you. This fee is generally based on a percentage of assets under management.The Bottom Line
Financial planning is about looking at all elements of a person’s financial life and coming up with a plan to help you as an individual meet your responsibilities and achieve your goals. It can include a number of services such as tax planning, estate planning, philanthropic planning and college funding planning. You might pay based on an hourly fee, a flat fee or an asset-based fee.Financial Planning Tips
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