A financial planner is professional that assists individuals and companies with financial planning. Most financial planners obtain official certification in order to establish competency and credibility. Keep reading to learn what financial planners do and how they help their clients.
Financial Planning Basics
Financial planning involves basic principles of accounting and finances. This includes specific concepts, such as money value and cash flow management, and broader concepts, such as financial statements and economic theories. Financial planning also involves professional counseling and communication with clients. Therefore, financial planners must understand common values, attitudes, behaviors and misconceptions regarding money and finances. Financial planners analyze their clients according to contextual variables, such as family status, net worth, income level, life stage and other extenuating circumstances.
Financial Planning Specializations
Financial planning covers different aspects, such as estate, insurance, investment, retirement, employee benefits and financial planning. Risk, liability and cash flow management are also important parts of financial planning. For example, financial planners may work as retirement advisors and assist clients with medicare, social security and tax-advantaged retirement plans. On the other hand, they may help their clients plan to reduce corporate tax liabilities in order to free up cash flows. Financial planners may also help their clients with insurance planning. For example, this might include performing an insurance needs analysis or setting up long-term care insurance. Financial planners also assist with long-term education planning, such as researching financial aid and recommending tax strategies.
What are the Six Financial Planning Processes?
There are six areas of financial work processes, including establishing client relationships, gathering data, analyzing finances, developing recommendations, implementing goals and monitoring results. During the first two stages, financial planners establishes a professional relationship that defines boundaries, expectations and client goals. The next two processes involve assessing the client’s financial status, developing a customized plan and presenting the information to the client. The final two processes involve implementing the agreed upon recommendations and monitoring the performance.
The CFP Board
The Certified Financial Planner Board of Standards (CFP Board) is the accreditation organization that provides CFP exams and certification. The CFP Board has four “E” eligibility categories that must be met for certification: education, exam, experience and ethics. Students are not required to have a bachelor’s degree at the time of the exam, but they must obtain one within five years. Students will be tested on over 100 financial topics. However, certain professionals, such as lawyers or Certified Public Accountants (CPAs), can directly take the exam without proof of previous education. Exam candidates must have at least three years of financial planning employment. Finally, exam candidates must agree to the high ethics standards, referred to as the Standards of Professional Conduct.
The CFP Exam
The CFP exam originally was a 10 hour test containing almost 300 questions that took two days to complete. Fortunately, the exam is now computer-based test with 170 questions that takes six hours to complete. The exam includes case studies, financial scenarios and in-depth financial questions. The CFP certification is public proof that the person is competent and knowledgeable. Every two years, CFPs must review their certification through completing at least 30 hours of continuing education credits.
Financial Planner Summary
Summing up, financial planners provide critical advice and assistants to their clients. A financial planner is a proficient professional that can reduce risks and increase financial stability.
Some may consider a financial analyst a special type of financial genius because he or she can make investment recommendations and predictions based on the studies of the market and business trends. A financial analyst is someone who works in the area of finance and helps individuals and businesses make sound financial decisions. Here is an overview of financial analysts, including what they do, how to become one and their career outlook.
What is a Financial Analyst?
Besides being one of the most popular employees in the finance industry, financial analysts are people who make business suggestions and recommendations to businesses based on their analyses of the company’s financial status and the market trends. Financial analysts usually have backgrounds in finance, accounting or business. They are usually very comfortable interpreting and working with data and generally enjoy working with numbers.
What They Do
Financial analysts evaluate current and past financial data, study business and economic trends, evaluate investment options and make appropriate recommendations to companies. They also assess the performance of market investments like stocks and bond. Financial analysts assess and evaluate the strength of a company by researching past history examining the company’s financial statements.
They also prepare written financial reports and present them to the company’s officials. Financial analysts typically work in banks, securities firms, pension funds, insurance companies and similar companies. Financial analysts may work as portfolio managers, rating analysts, fund managers and risk analysts.
When financial analysts begin their careers, they generally focus on one specific investment field. As they become more knowledgeable and experienced, they work as portfolio managers and handle several types of investments. Earning a master’s degree can also help advance their career.
How to Become a Financial Analyst
To become a financial analyst, the individual must have a bachelor’s degree in finance, economics, accounting, mathematics or statistics. These are four-year programs offered at colleges and universities. Students in the program complete major-related courses and complete internships at financial institutions to obtain hands-on training working under supervision.
Although financial analysts are not required to be certified, employers often prefer hiring financial analysts who have certification. Certification is also a way for the analyst to demonstrate expertise, commitment and knowledge in this area. The CFA Institute offers the Chartered Financial Analyst certification to financial analysts who have at least four years work experience and a bachelor’s degree.
Wage Potential and Career Outlook
Financial analysts make very good salaries, although wages can vary by work experience, employer and location. Below are the five top-paying states for financial analysts and the wages they earned in 2017.
- New York – $134,560
- Wyoming – $111,210
- Colorado – $110,290
- California – $109,580
- Alaska – $109,330
As of May 2017, financial analysts earned an average annual wage of $99,430, according to the U.S. Bureau of Labor Statistics (BLS). The BLS also predicted that financial analysts could see an employment growth of 11 percent from 2016-2026. As the economy continues to grow, so will the need for financial analysts.
Financial Analyst Summary
Working as a financial analyst can be exciting, rewarding and very challenging. Who can really say they wouldn’t enjoy working with money and knowing they’re helping others make money? This is just some of the excitement an individual can expect when working as a financial analyst.
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