Financial planner

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A financial planner or personal financial planner is a professional who prepares financial plans for people. These financial plans often cover cash flow management, retirement planning, investment planning, financial risk management, insurance planning, tax planning, estate planning and business succession planning (for business owners).

Video Financial planner

Scope

Financial planning should cover all areas of the client's financial needs and should result in the achievement of each of the client's goals as required. The scope of planning would usually include the following:

Risk Management and Insurance Planning 

Managing cash flow risks through sound risk management and insurance techniques

Investment and Planning Issues 

Planning, creating and managing capital accumulation to generate future capital and cash flows for reinvestment and spending, including managing for risk-adjusted returns and to deal with inflation

Retirement Planning 

Planning to ensure financial independence at retirement including 401Ks, IRAs etc.

Tax Planning 

Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes

Estate Planning 

Planning for the creation, accumulation, conservation and distribution of assets

Cash Flow and Liability Management 

Maintaining and enhancing personal cash flows through debt and lifestyle management

Maps Financial planner

Process

The personal financial planning process is described in ISO 22222:2005 as consisting of six steps:

Step 1: Establishing and defining the client and personal financial planner relationship

Step 2: Gathering client data and determining goals and expectations

Step 3: Analysing and evaluating the client's financial status

Step 4: Developing and presenting the financial plan

Step 5: Implementing the financial planning recommendations

Step 6: Monitoring the financial plan and the financial planning relationship

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Licensing, regulations and self-regulation

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Roles and Compensation Models

Financial planners are compensated through commissions, hourly fees (averaging between $150 and $300 for CFP certificants), assets-under-management (averaging 1%), and the monthly retainer model (averaging $100-$300 per month), pioneered by Alan Moore and Michael Kitces of the XY Planning Network.

The compensation of planners varies greatly especially for those paid on commission. Commissioned advisors may expect to earn a very low salary for the first year, gradually increasing to approximately $100,000 over 5 years. In the long term, a successful commission-based advisor can earn multiple tens of thousands per month "passively" through recurring commissions. However, 80% of commissioned advisors leave within the first 5 years due to the very difficult starting period in a commission-only model.

For an employee advisor working for a wealth management firm, the main roles are support advisor (responsible for data gathering, software input, modeling scenarios, and analyzing data), associate advisor (responsible for managing client relationships and assisting with larger clients), lead advisor (responsible for managing client relationships, focused on larger clients, leading a team, and mentoring younger advisors), and practicing partner (responsible for managing larger client relationships, shareholder responsibilities, business development, and mentoring younger advisors). In 2017, the average compensation for advisors was $65,000, $94,000, $165,000, and $334,000 respectively.

For those owning their own firm under the assets-under-management model, one can expect his or her salary to be approximately 40% of gross revenue. Thus, a practice with $100,000,000 under management (attained by 100-200 families with $500,000-$1,000,000 net worths) would lead to an annual income of $400,000.

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See also

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References

Source of the article : Wikipedia