A financial planner is essentially an expert who helps you with organising your finances. He or she also projects the results of your investments and savings to determine whether you are well prepared for retirement. Additionally, financial planners help you in making decisions that will assist you in reaching your financial goals.
Below are some of the areas on which a good financial planner will make recommendations:
• The amount of money you need to save
• The things you need to do in another way
• The kind of mortgage you should have; whether you should refinance or pay it off
• The kinds of retirement accounts you should use
• The amount of money you should keep in your emergency fund
• The type and amount insurance you should have (long term care insurance, life insurance and disability insurance would be included in this. Additionally, some financial planners make recommendations on property, health and casualty insurance).
• The changes you should make to potentially improve your tax situation
• The rate of return that will be required to accomplish your goals over a specific period of time
• The level of investment risk that is suitable for the different kinds of accounts you have
• Whether or not it makes sense to downsize in the future
In addition, a number of financial planners provide tax planning services and give advice on estate planning. Before making a decision, talk to your potential financial planner about which of the above items he or she addresses. Additionally, you should find out whether the advice they give is put in writing. It is always wise to get recommendations in writing because doing so leaves no doubt as to the recommended course of action.
This type of advice could range from an overall recommendation on the kind of asset allocation model you should be following, to detailed recommendations on the types of investments to buy and sell. There are financial planners who offer investment management services along with financial planning. Determine whether a potential financial planner gives particular investment advice or just planning services.
The sign of a good financial planner is one who will not make any recommendation before he or she understands your goals and objectives and have formulated a long-term financial plan for you. If someone you are considering immediately starts to talk about a financial product, even if he or she refers to himself or herself as a financial planner, it is more likely that this individual is a financial salesperson. A financial planner, who has your interests at heart, will first gather data and account statements on each aspect of your financial life.