DEFINITION of 'Paraplanning'

Paraplanning involves performing the administrative duties of a financial planner. This function was created to allow financial planners to focus on working more closely with clients and identify their investing needs.

BREAKING DOWN 'Paraplanning'

Paraplanning staff does most of the grunt work (preparing plans and reports) for financial planners. Some large firms have developed new departments for paraplanners within their organizations; however, the cost of hiring paraplanners is high, and as a result, this option may be unavailable to some smaller companies.

Paraplanning Qualifications

Paraplanners are expected to hold a bachelor’s degree in accounting and/or finance. The Financial Industry Regulatory Authority (FINRA) offers a Registered Paraplanner (RP) qualification. To receive this, applicants must complete a 10-module course and take a final closed book exam. To increase their prospects of employment, paraplanners can become a Certified Public Accountant (CPA). Working as a paraplanner is being utilized by recent graduates to get a foot in the financial planning industry's door, where they can gain experience, network and move up to become a financial planner.

Paraplanning Responsibilities

Paraplanners typically have minimal client interaction. They are responsible for preparing and constructing plans outlined by the financial planner. Other duties include managing the firms financial planning software and billing clients. Financial plans get regularly updated as a client's situation changes; paraplanners help gather new information and provide financial planners with updated projections. Paraplanners may also attend client meetings to take notes and follow up on administrative tasks, such as obtaining bank statements and identity documents.

In-House Paraplanning

Internal paraplanning allows financial advisors to become familiar with the specialized skills of their staff. For instance, if a paraplanner who is known for his or her skills reading bank statements is needed, the financial planner immediately knows who to utilize. Hiring internal paraplanners also reduces the risk of sensitive client information getting leaked to competitors. One downside of hiring in-house paraplanners is that they could put themselves above other staff and the firm to receive a promotion to a more senior role.

Outsourced Paraplanning

Financial planning firms can outsource paraplanning to companies or independent contractors who provide paraplanning services upon request. Paraplanning outsourcing may be beneficial to smaller firms that have limited budgets, but need additional assistance during busy periods or intend to grow their business. Financial planning firms that decide to outsource need to consider that control might be compromised by delegating work to external contractors. For example, a financial planner may not be aware of a contractor's other work commitments, which could make it difficult to meet a tight deadline. Setting measurable work targets ensures contractors are accountable.

RELATED TERMS
  1. Financial Planner

    A financial planner is a qualified money-management professional ...
  2. Outsourcing

    Outsourcing is a practice used by different companies to reduce ...
  3. In-House

    Conducting an activity or operation within a company, instead ...
  4. Investment Consultant

    An investment consultant provides investors with investment products, ...
  5. Aggregation

    Aggregation is a principal involving the combination of all future ...
  6. Independent Contractor

    An independent contractor is a person or entity contracted to ...
Related Articles
  1. Personal Finance

    The Role of Financial Planners Explained

    Financial planners do much more than provide investment advice.
  2. Managing Wealth

    Trending Toward Asset-Based Management

    Will charging fees instead of commission increase your client base?
  3. Financial Advisor

    The Upside of a Client Service Associate Career

    Client service associates play a vital role in the financial industry. Here's the lowdown on this position and what it can offer.
  4. Personal Finance

    How the Financial Planning Process Works

    Understanding what financial planning involves can make the process seem less daunting.
  5. Financial Advisor

    Ethical Issues For Financial Advisors

    Financial advisors may face ethical issues in their work. Find out what they are.
  6. Retirement

    Does a Soon-to-Be Retiree Need a Financial Planner?

    A good financial planner can help you make a plan to properly fund your upcoming retirement.
  7. Personal Finance

    4 Reasons to Hire a Financial Planner

    While hiring a financial planner isn't for everyone, here are four reasons why you should consider it.
  8. Financial Advisor

    How to Use Client Tax Forms to Gain More Business

    Financial planners can learn a great deal about their clients by looking at their tax returns. Here's specifically where to zoom in.
  9. Personal Finance

    You Can’t Afford Not to Hire a Certified Financial Planner

    Fees charged by financial planners may seem high, but they will increase your wealth.
  10. Financial Advisor

    5 Reasons to Use a Financial Advisor

    Nobody wants to pay for advice, but the help of a pro can be invaluable.
Trading Center