Financial Myths

While American consumers
generally hold financial planning and financial planners in high esteem, they also hold many myths about financial planners that sometimes make them hesitant to seek out their services. In an attempt to clear up some misunderstandings, here are six truths behind the myths about "real financial planners."


Financial Planning Myth #1

"Financial planners are stockbrokers or other financial salespeople whose main job is to sell financial products."

The actual purpose of a financial planner is to comprehensively help clients clarify their goals and manage personal finances in order to help achieve those goals.  This may, but does not always, involve the purchase of financial products.  Financial planners help their clients in a comprehensive manner with such things as financial goals, cash flow management, taxes, retirement, college funding, business planning, estate planning, insurance and many others.  Investing may be an important part of a client's financial plan, but is not the only focus of the financial planner.  Your financial planner can be seen as a coach putting together your financial game plan and ensuring that your plan is effectively executed.  A good financial planner will often enlist outside specialists such as attorneys, stockbrokers, insurance agents, and CPAs for their expertise on topics that the financial planner might not be considered an expert on.

Financial Planning Myth #2

"Financial planners serve only the affluent."

While some financial planners work exclusively with high income clients, many work with clients of all income levels.  Anyone who makes money and spends money can benefit from the advice of a financial planner.

Financial Planning Myth #3

"Financial planners only do "big plans"."

Financial planners will often work with a client on a single issue such as budgeting, college funding, or retirement planning because that is the one thing the client is currently concerned about.  A good financial planner will focus on the single issue depicted by their client while still addressing their overall financial situation and goals so that the one specific issue does not adversely affect other aspects of their financial life.

Financial Planning Myth #4

"Financial planners aren't worth the expense."

Financial planners charge for their services as do attorneys, doctors and other professionals.  This should be thought of as an investment rather than an expense because a good financial plan should save and earn you far more money than you would have paid in fees or commissions.  Beyond the monetary benefits, a client may also gain peace of mind, time saved and a better focus on their financial life.

Financial Planning Myth #5

"Legitimate financial planners only charge hourly fees."

Financial planners charge in a variety of ways including hourly fees, fees based on a client's invested assets, annual retainers and commissions from the sale of financial products. Every type of fee system has advantages and disadvantages.  The important thing is that the financial planner fully discloses how he or she charges.  It is also important that he or she ensures that you understand the pros and cons of their system and that the arrangement suits your needs as a client.

Financial Planning Myth #6

"Most people don't need financial planners."

During the heyday of the bull market, consumers had the attitude that they could handle investments on their own.  Once the bull market ended, many consumers learned a painful lesson.  They could have used the experience of a financial planner to keep their investments well diversified* and keep their focus for their long-term investments.

*Diversification does not ensure a profit or guarantee against loss; it is a method used to help manage risk.

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Check the background of this financial professional on FINRA's BrokerCheck