One of the biggest misconceptions when it comes to certified financial planners (CFP) is that only the affluent can afford them. That couldn’t be further from the truth. In all honesty, you can’t afford not to hire a CFP when it comes to planning for future expenses, and here’s why.
If you’re looking to lose weight, you’ve heard over and over about the benefits of hiring a personal trainer. Even when it comes to running a race, having a coach help you prepare is invaluable. Our financial health is the area we overlook and ignore the most, yet our finances could often use a “personal trainer” just as much. That’s where a CFP comes in. A CFP's job is to understand a client’s goals, then help them develop a plan of action to meet those expectations. Along the way, CFPs do their best to keep their clients from getting derailed, just like a fitness instructor would do for your body.
Can You Afford a Financial Planner?
You may be thinking, “Okay, I get that, but I still can’t afford to pay for one.” There is no set standard among certified financial planners. They are free to charge how they see fit. The truth is most CFPs charge an entry-level or minimum fee. For example, they may charge $200 per month, which comes out to $2,400 a year. That may sound like an astronomical amount to the average consumer, but in actuality, most of us have no problem spending that amount on our monthly cable or cell phone bill. Some certified financial planners may even choose to charge based on a percentage of income. An example of that would be if someone were making $150,000 per year, then they’d pay an annual fee of $1,500. Others may charge a percentage based on assets. So if there is a $100,000 account, the planner may charge 1%- 2.5%, depending on the scope of work. (For related reading, see: Fee-Only Advisors: What You Need to Know.)
When it comes to hiring a CFP, they’re going to charge you reasonably. The good thing is, when working with a planner, they typically find a way to offset their fees. This may be in the form of tax savings, debt-reduction strategies or budget cuts you may have overlooked. Planners are often well-versed in the insurance world too. So with most people being insurance-poor it definitely helps to have trained eyes looking at your policies. There is a plethora of ways a CFP will try to counteract the cost of their own fee. (For related reading, see: Why Financial Advisors Sell Life Insurance.)
A Financial Planner Will Help You Reach Your Goals
Lastly, they’re going to hold you accountable to your goals, which is essential to your financial health. You’ll likely attain your goals quicker with a coach. A planner is there to keep you in check, to push you when you need that extra boost and to help get you where you dream of being financially. If you don’t hire a CFP, then you don’t know what you don’t know, and you can’t do what you don’t know to do. A suitable financial plan is a key component in preparing for the future. So the question really isn’t, “Can I afford a certified financial planner?” Because yes, you can! The real question is "Do you want to?”
(For more from this author, see: The Roles Fear and Greed Play in Investing.)
Disclaimer: Heritage Investors, LLC, 11470 Parkside Dr Suite 201, Knoxville, TN 37934, (865) 690-1155, is registered as an investment adviser with the State of Tennessee. Heritage Investors only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.