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.

  1. Outsourcing

    Outsourcing is a practice used by different companies to reduce ...
  2. Investment Consultant

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

    1. Used in corporate financial planning, aggregation is a process ...
  4. Independent Contractor

    A self-employed taxpayer that controls his or her own employment ...
  5. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  6. Roboretirement

    An automated advisory system that manages your retirement plan ...
Related Articles
  1. Financial Advisor

    Comparing Financial Advisors & Financial Planners

    When scanning the financial advisor landscape, recognize that both financial advisor and financial planner are very broad categories.
  2. Personal Finance

    Financial Planner: Career Path & Qualifications

    Learn what education and certifications you need to become a financial planner, as well as the future prospects and earnings potential for financial planners.
  3. Investing

    Be A Financial Planner From Home

    Now may be a good time to explore the possibility of working as a finanical planner from your home.
  4. Financial Advisor

    Career Advice: Accountant Vs. Financial Planner

    Identify the key differences between a career in accounting and financial planning, and learn how your personality dictates which is the better choice for you.
  5. Personal Finance

    How a Financial Planner Can Help You Get Organized

    There are several ways in which a financial planner can help get you organized financially.
  6. 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.
  7. Financial Advisor

    Ethical Issues For Financial Advisors

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

    Why Investors Prefer Independent Financial Planners

    Independent financial planners are the most trusted by investors among all advisors types. Here's why.
  1. What are the reasons that cause financial advisors to fail in their careers?

    Think about the risks with financial planning before you pursue a career in the industry, and make sure you aren't wasting ... Read Answer >>
Trading Center