What is Financial Planning?
When asked what I do for work I often struggle to formulate a concise response. I usually simply tell people that I’m a financial planner, but I’m not sure this sends the full message. First of all, a lot of people don’t like to talk about money – and the word “financial” can be a real conversation killer. More importantly, financial planning is comprised of a broad range of subject areas across multiple disciplines. This can make it hard to sum up in casual conversation. My workflow varies widely from day to day depending on the topic at hand; my projects often focus on a variety of issues both quantitative and qualitative in nature.
What’s in a name?
It is important to note that anybody can put the words “financial planner” in their title. In fact, it is not uncommon for financial professionals to do so. “Financial Planner” – like the terms “financial advisor” and “financial consultant” – is a catch-all term to describe a role. However, such titles shed little light on certification, training, or ongoing education requirements. As such, professional designations are important for consumers to understand and identify.
The leading designation for financial planners is the CFP® (or CERTIFIED FINANCIAL PLANNER™). In order to use the CFP® marks, an individual must meet and satisfy a series of educational and ethical requirements, pass a comprehensive examination, and adhere to strict ongoing education requirements. When describing my work in detail, I often distinguish this designation and the process by which I obtained it.
The subjects covered in the CFP® curriculum cover the following areas: fundamental positioning, insurance, employee benefits, investments, retirement planning, income tax planning, and estate considerations. Sound like a lot? It is – and many issues span across multiple subject areas. Planning for retirement involves benefits, investment, and insurance considerations, while estate planning weaves in elements of tax and fundamental positioning.
All in a Day’s Work
As I said in the opening, no two days are the same for many financial planners. On any given day, I may be performing a fee analysis on 401k plan investments, preparing a personal balance sheet, comparing mortgage options, tackling debt, coordinating with estate attorneys, or advising on the timing of social security benefits. The list could go on. Some clients may only need an hour or two of help, while others are with our firm for a lifetime.
This range of efforts perfectly encompasses the role of a financial planner. Importantly, while this work is often quantitative in nature, it also requires the integration of qualitative or non-financial criteria: risk tolerance, attitudes about money, health, mortality, and legacy building – to name a few. Bottom line? Financial Planning is best described as the coordination of information and professional services across a spectrum of financial matters – integrating personal attitudes, goals, and preferences into the decisions that shape a plan.