The term financial planner, in its broadest sense, refers to someone who charges you for advice on how to manage your financial life. This advice can range from help achieving a specific goal to the construction of an overall plan on how to manage your finances. A financial planner can be someone with limited or specialized experience or someone who has earned the certified financial planner designation.
Given the broad scope of advice that a financial planner can provide and the increasingly complex nature of people’s financial lives, you will likely face a time when these services can be beneficial. Whether you are trying to start a college savings plan, make sure you will be protected in retirement, address your insurance needs or save for a house, the services of an expert can provide benefits. While it might seem counterintuitive, using a financial planner to shop for insurance is often your best bet.
Keep Reading: 31 Ways Financial Planners Can Make You Richer
When to Hire a Financial Planner to Find Insurance
While a financial planner will most typically be geared toward advising you on life insurance, he will also be able to determine if you need a long-term care plan. Furthermore, a full-service financial planner will review all of your coverage — including health, dental, auto, vision and homeowners insurance — to determine if each is serving your overall financial plan. Given this breadth of potential expertise, choosing a financial planner is a good idea when you need to review your overall insurance needs rather than plug a specific gap.
With different employers offering different combinations of benefits, talking to a financial planner after you have switched jobs can assure that there are no major gaps in your coverage. Some employers, for example, offer long-term disability coverage and accidental death and dismemberment coverage, while others do not. Along with health and life insurance, these protections are more or less appropriate for different people. Consulting a financial planner after a job change can guide you on what matters most.
Another good time to consult a financial planner about your insurance needs is after a major life change. These include the typical things like marriage, divorce, birth of a child or receiving an inheritance. Each of these events can impact your insurance needs and how those needs interact with the needs of the important people in your life.
“Insurance is complicated,” said Timothy Holt, a lawyer and certified financial planner with the Holt Law Group. “Most people have to rely on an advisor to help them with their choice.”
“Your safest bet is to use a CFP practitioner,” said Holt. “Not only have they demonstrated a high level of knowledge, but they are obligated to put your interests ahead of their own.”
Insurance Agent Versus Financial Planner
Where an insurance agent is more likely to focus on areas in which the products he has to offer can fit your needs, the financial planner should be more focused on the big picture of your financial health. With this in mind, however, not all financial planners are licensed to sell insurance. If you are looking for insurance but have hired a financial planner who is not licensed to sell insurance, you might find that this service is outsourced to an insurance agent. The good news is that your financial planner will be able to advise you and make sure you get only the products you need.
Another major difference between these two professionals tends to be how they get paid. While fee-based insurance agents are becoming more prevalent, insurance agents typically get paid a commission for products they sell. While some financial planners get paid this way as well, most get paid a fee for their services, so they are not motivated to earn more by selling you products you might or might not need. It is important to understand the motivations of the person you are hiring so that you can put his advice into the proper context.
Tips on Finding a Financial Planner
The two most important steps to finding the right financial planner are understanding how they get paid and making sure that they can meet your personal needs. LearnVest, for example, has you fill out an online profile and then meet with a financial planning professional. The thrust of this process is to make sure that the plan designed for you meets all of your concerns — including areas you might have overlooked.
Financial planners can provide you with important services for both insurance and beyond. Professional advice sets you up for success and is a tool worth using.