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How To Choose A Financial Planner



On our blog we’ve talked about budgeting and financial planning to help you with your Now money and your Future money. Now we are here to discuss financial planners and the differences between them.


What is a financial planner?

A financial planner maps out your finances. They look at how much money you have now, how much money you’ll likely need in the future, and how you might get from today to the future.


If you are looking for a financial planner who will act in your best interest, you should make sure to choose one who is a fiduciary. The fiduciary standard is when your financial planner or financial advisor is legally bound to act in your best interest. This type of financial planner may be a fee-only advisor because they don't accept commissions on the investments they recommend - we'll talk more about this later.


Certified Financial Planners (CFPs) are always fiduciaries, meaning they are legally required to put their clients' interests ahead of their own at all times.


A full plan should look at:

  • Capital needs (capital is basically another word for money - looking a the money coming in and out, and being saved)

  • Retirement

  • Employee benefits

  • Insurance to help you manage risk

  • Taxes

  • Estate Planning (will, up-to-date power of attorney)

  • Charitable Planning

  • Educational needs

  • Disabled child needs / Dependent adult needs

  • Terminal illness planning

  • Divorce or remarriage considerations

At Untangle Money, we focus on the first two pieces. Your Now Money (this is your budget or spending plan), and your Future Money (what will your retirement look like). With the Master Plan, we look at your financial goals.


Why do I need a financial plan?

Managing your finances and planning for your future can sometimes be overwhelming. Especially when it comes to investing or building a retirement plan. Which is why it can be nice to have the guidance of an expert or an extra helping hand. That’s where a financial planner comes in. A financial planner is a financial expert who can help you plan your finances, look at strategies to invest your money and help you achieve your financial goals.


How do I choose a financial planner?

While any financial planner will have a great deal of knowledge about financial planning, many advisors also specialize in certain topics - investing, divorce, retirement, and taxes to name a few. So when you’re looking for a financial planner, it’s important to find one who can help you with your needs.


Thinking about why you want to talk to a financial planner will help you narrow down your search. You want someone who you can have a solid working relationship and who can help you make smart financial decisions. You don’t want someone who makes you uncomfortable asking questions, or who talks over your head.

Similar to dating, it can take some time to find someone who you feel comfortable with, so be patient as you search for the right financial planner for you and don’t let bad experiences dissuade you from finding the right financial planner for you.


What are the differences between financial planners and financial advisors?

Financial Planners:

Financial planners make the plan. They map out how you can achieve several of your financial goals, using assumptions and projections. While they can educate you on investment types and strategies, unless they have additional licenses and registrations, they cannot tell you what stocks or funds you should buy, nor can they manage our money for you.


Some financial planners are also financial advisors.


Financial Advisors:

Financial advisors give you advice on how to manage your money, they tell you what to invest in to help you reach the target set out in your plan. Basically, they execute the plan.


What are the different types of financial planners and financial advisors?

Fee-For-Service Financial Planner:

Basically, a fee-for-service financial planner means you pay a fee in exchange for financial planning services. Usually, you pay a flat fee (in the range of $1,500 to $3,000) for the financial plan, and a rate of $200-$400 per hour, or a percentage of assets (often 1%) if you want ongoing management of your investments. Be careful of fee-based planners. The ‘based’ part of the title means that they can receive compensation from selling you products. What you want to see is ‘fee-only’.


Here at Untangle Money, we recommend a fee-for-service financial planner. Preferably a certified financial planner (CFP). Using a fee-for-service financial planner is the best way to ensure that the person you’re working with has your best interests in mind. CFPs are always fiduciaries which means they have to act in your best interest.


Untangle Money is a fee-for-service financial planner, and founder Kristine is working towards her CFP designation. We leverage technology to offer the heart of the financial plans at a more affordable and cost $350. We cover the main components of the financial plan which looks at your Now Money (budget) and your Future Money (look at what your retirement might look like and plan for future financial goals).


You can find many Canadian fee-for-service financial planners here!


Banks:

Many banks provide the option to use their financial advisors for your financial planning needs. You may want to work with your bank because you already have a relationship with them, and these plans are often free.


However, it’s very important to make sure that your bank's investment services are the right fit for you. You should know that although they are called financial advisors, it would be more appropriate to call them salespersons. These advisors/salespersons are there to sell you the bank's products, and often do not have your best interests in mind. They have quotas to meet, and may have their own agenda.


A Personal Financial Planner (PFP) is a designation that the banks themselves give to their employees for training that is a third of the time to complete as the CFP.


Online Financial Planning Services:

An online financial planner should typically offer the same benefits of a traditional in-person financial planner but at a lower cost, with not quite as much detail, and not as much interaction with a person.


Online financial planners allow you to set specific goals for your retirement, education, investments, and spending. Because they are more affordable, it is easier to check in with your plan more frequently and know if you are on track or not.


Untangle Money is an online financial planning service. We use technology to decrease the cost of your financial plan, lowering the cost of the heart of the plan to $350. We don’t sell insurance, and we don’t sell investment products, so you know that our plan is only based on what we think is best for you. We are also judgement-free. It’s your money and you can spend it how you please. We only want to give you information and guidance on what your choices mean for your financial picture.


We recommend that you look at your financial plan no more than once a year; or whenever any significant financial changes happen.


Robo-Advisors:

A robo-advisor is an online automated investing service. Robo-advisors are cheaper than hiring a financial advisor but they typically don't offer a full financial plan unless you pay an additional fee or invest a large sum of money. Robo advisors can do much of the work that financial advisors typically do such as portfolio rebalancing and tax-loss harvesting. They are a great option because they offer a diversified portfolio at a really low cost. And as we discussed in our blog on percentages: small percentages matter. Over a ten year time horizon, robo-advisors will make you more money than most financial advisors specifically because of these fees.


Independent Financial Advisors:

Often financial advisors will give you a financial plan for free. Most have a minimum amount of money that you need to invest before they will work with you, or work on the condition that you purchase insurance through them. This is because they are paid the cost or your insurance premiums for a year multiplied by 1.5 to sell insurance to you.


Financial advisors often require that you invest your money through their firms and charge you a percentage of your assets to manage your investments (when they purchase investment products on your behalf, these products have additional fees, and some products may include kick-backs to advisors - called commissions - which can cause a conflict of interest because an advisor may want you to buy the product that gives them the biggest commission).


What’s next?

Financial independence is a huge part of being a strong, independent woman, it is our mission to help women successfully set themselves up financially.


At Untangle Money we help women understand their (real!) financial picture, and obtain financial guidance from people that actually, really, get it. We would love to help you, too. Join the community of hundreds of other women looking to strengthen their financial well-being. Get in touch here for a free consultation!



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