How Financial Planning Works| Henceforward

This article aims to clear some of the misconceptions about financial advice and planning and how it works because many people think how financial planning works might not apply to them. It is something that can work for anyone – young, old, rich, or poor.

FAQ 1: Do I need a lot of money to work with a financial planner?

No, not at all. If you’re starting out, a financial planner can help you develop good financial and money habits, like pay off debt, start saving, develop a retirement plan etc. If on the other hand, you have accumulated a lot of wealth, financial planning can help model cashflow needs, legacy and estate planning, optimizing your investment portfolio. Wherever you are on the wealth spectrum, financial planning has the ability to add value in various ways.

FAQ 2: How do financial planners get paid?

A fully qualified professional CERTIFIED FINANCIAL PLANNER® tend to be paid via fees for the advice they provide, rather than from commissions generated from products sold. But that isn’t always the case because depending on the business model of the firm a financial planner works for, they might still generate commissions and ‘fees’ from products sold, rather than from the advice provided.

FAQ 3: Is there difference between a financial advisor and a financial planner?

The role performed and financial problems they solve for are largely similar. Financial planners tend to have higher qualifications and accreditations because the threshold to become a financial advisor is a lot lower. Financial advisors tend to also generate most of their income from selling financial products that generate commissions and fees, so the ‘advice’ you get is more of a means to an end to sell you a product. Financial planning tends to be more focused on providing holistic advice to help you achieve your goals and what’s important to you.

FAQ 4: What exactly can financial planning help me with?

Financial planning broadly, covers a lot of different areas, which you can work on holistically, or simply focus on those areas that are important and matter to you. These include:
– cashflow management (improving your finances),
– debt busting strategies,
– developing an effective investment strategy,
– planning for retirement or financial freedom,
– estate planning which can include drafting wills,
– ensuring there is enough liquidity in your estate,
– legacy planning and wealth transfer,
– post-retirement income planning,
– protecting your income and assets,
– children’s education planning,
– sophisticated scenario planning and modelling,
– catering for loved ones and dependents if you die,
– global wealth management

FAQ 5: How do I choose a good financial advisor or financial planner?

Trust is the most important factor. You’ll get a sense or feeling if you can trust a person. Understand how they get paid – by selling products or giving advice? Ask how long they’ve been in the industry and what their qualifications are? Do you feel you’re being sold to, or that the person genuinely wants to help you solve whatever problem you’re experiencing or need help with?

Financial planning is simply a way to achieve your goals and what matters to you. It’s about being able to live the lifestyle you aspire to, both today and in future. Getting organised and being able to manage your finances more effectively are the foundation. Once you’re able to do that, you can invest more successfully and put yourself on the road to achieving financial security and independence.

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