Financial Planning 101 for 2022 – Grand Island Independent

Over the years, I’ve noticed a growing trend in my mailbox: readers in search of financial planners or advisers — or assistants.

When taken in the message’s context, it’s pretty clear that not everyone means the same thing when they refer to a financial planner-adviser-assistant-helper.

One reader wanted to know where to find a financial planner who would just take her paycheck, pay all of her bills, invest for her retirement, give her an allowance, balance her checkbook and not charge her very much. (We’d all like one of those, right?)

Then, there are times when the context lets me know that a desperate reader looking for a “financial planner” really needs a reputable credit counseling organization that offers debt management.

And so, in an effort to clarify and perhaps educate, here’s the lowdown on financial planners, advisers, coaches and debt managers.

Financial planner

Anyone can call him or herself a financial planner. If you are ready to seek the services of a professional financial planner and avoid an amateur, you want one who has earned the special credentials of chartered financial consultant (ChFC) or certified financial planner (CFP).

These professionals make a comprehensive analysis of your entire financial life, help you identify your goals and then create an investment and insurance strategy to achieve those goals. Estate planning is often offered by a credentialed financial planner and includes wills, trusts, tax-planning, legacy and end-of-life planning.

Generally, but not always, a professional financial planner will have minimum standards for new clients that have to do with net worth. If you are deeply in debt, a financial planner is likely to tell you to come back once you are out of debt.

Financial coach

A financial coach is an adviser who can help you reach your financial goals by teaching you money management skills, such as how to build savings or pay down debt. A financial coach can help improve your financial literacy but cannot give you specific investment advice.

A coach can help you discover what drives your financial decisions then help you develop a budget and create a healthier attitude that will lead to better money habits.

While there are no certifications, coursework or licenses required for financial coaches or advisers, there are training programs run by the Association for Financial Counseling and Planning Education. You can find a coach at AFCPE.org.

Credit counselor

Theoretically, everyone can use the services of a financial planner at some point in their financial journey. But certainly not until one is free of credit-card debt and other unsecured debt. A financial planner will want to see a consistent positive cash flow. Until you have achieved that level, there are other services that can help you.

If you are in a credit card mess and unable to keep up with even your minimum monthly payments, credit counseling may be the answer.

A qualified counseling organization, such as the National Federation for Credit Counseling (NFCC.org; 800-366-2732), goes to your creditors on your behalf to create a payment plan you can afford. You will receive education to make sure that you do not return to debt once you’re out of it.

Debt manager

A debt-management program will be offered to you in conjunction with credit counseling. If you enter a DPM, instead of sending individual payments to your creditors each month, you will write one check each month to the counseling organization for all of your negotiated credit-card debt, and the payments will be forwarded to your creditors accordingly.

Billing structures

Fee-only financial planners, coaches and advisers are paid directly by you for the advice they give. Typically, they charge by the hour, like an attorney, but some will quote a flat fee. The National Association of Personal Financial Advisors offers a directory of fee-only planners by state at NAPFA.org (800-366-2732) or Garrett Planning Network (garrettplanningnetwork.com).

Fee-based planners, like a fee-only planner, charge for the advice and financial plan but also earn commissions on top of their fee if you purchase products recommended in the plan.

Commission-based planners make money from the products they sell. This type of planner does not charge for his or her time, but has a big incentive for you to purchase the products they recommend.

Financial coaches generally charge a set fee, either by the hour or a set monthly amount, which should be negotiated up front.

Credit counseling and debt-management services are generally offered by nonprofit organizations such as NFCC.org. Any setup fee or monthly fee should be reasonable, usually defined as $50 or less, with monthly fees in the $25 range. The agency should be willing to waive all fees in cases of true hardship.

Mary Hunt writes this column for Creators Syndicate. She is the founder of www.EverydayCheapskate.com. Submit comments or tips or address questions on her website. She will answer questions of general interest via this column, but letters cannot be answered individually.