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Top 7 Myths About Financial Planners: Part 1

U.S. households generally agree they need a financial plan to achieve long-term success and security.  However, too many households—including those with engineers and scientists—hold beliefs about financial planners that make them hesitant to seek out or work with a qualified financial planner.  

Here are eight truths to dispel the myths about “real” financial planners.

Myth 1: Financial planners are the same as stockbrokers, insurance agents and other financial salespeople.  

Reality: The primary function of a stockbroker (aka registered rep), insurance agent or other financial salesperson is to sell financial products.  These sales people follow the suitability standard, which in most cases means “buyer beware.” 

In contrast, the main purpose of a financial planner is to help you clarify your big picture goals and aspirations and understand why they are important to you.  Then, the planner will help you create a plan to effectively manage your financial resources to achieve them.

A Certified Financial Planner™ professional (CFP®) embraces the fiduciary standard, which is the legal and moral obligation to always be loyal to the client and always put the clients interest first.  And while a financial planner may be licensed to sell financial products, real financial planners honor the commitment to put their clients first, not the sale of products.

Myth 2: Financial planners focus primarily on investments. 

Reality: Just as all engineers are not the same (e.g., electrical, agricultural), not all people in financial services are the same. 

Financial planners focus on much more than investments.  Real planners help clients with many aspects of their financial lives: cash flow, taxes, goals (e.g., retirement, college, family vacation), insurance and risk management, estate planning and other situations. 

While investing is an important part of some of these goals, it is not the only part.  In fact, it is usually not the primary focus of a planner.  Think of your financial planner as the architect who’s designing or redesigning your financial house.  To make sure is designed and executed correctly, the planner will get help from outside specialists such as attorneys, CPAs and insurance agents, all in the best interests of the client.

Myth 3: Financial planners only do big, comprehensive plans. 

Reality: Engineering managers and teams weigh various elements (e.g., mechanical, electrical, software) on the total product design.  A decision in one area of design affects other areas.

Similarly, many financial planners do comprehensive plans to make sure they integrate all aspects on your financial life.  A decision in one area of your financial life usually affects other areas.  For example, a decision to buy a more expensive house/car affects your cash flow, insurance and savings decisions.

Frequently, however, financial planners assist individuals and families with a single issue, such as deciding what to do with a retirement account or inheritance, saving for college, or paying for long-term care.

Still, real financial planners provide advice on this single issue within the context of your overall financial situation.  The goal is to make sure the recommendations don’t undermine other aspects of your financial life.

Continue to Part 2 to see myths 4-8 about Financial Planners.

Top 7 Myths About Financial Planners: Part 2
Buy Gold for Bling - Not Your Portfolio.

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