Financial planning is a complex, multifaceted discipline that requires a deep understanding of investments, taxes, estate planning, insurance, and retirement. Despite the complexity involved, many of us naively plunge into the world of financial planning without fully appreciating the intricacies of the practice. Reflecting on my early forays into this discipline, I can now pinpoint five crucial aspects that I should have understood before engaging the services of a financial planner.

Firstly, the importance of fiduciary duty was greatly overlooked. A fiduciary duty is a legal obligation of one party to act in the best interest of another. In the context of financial planning, this implies that your financial planner is obligated to make recommendations that will maximize your benefit, even when such decisions may not yield the most lucrative returns for them. This seemingly straightforward obligation, however, is not universal. Not all financial planners are required to abide by this rule. Knowing this beforehand could have helped me discern between financial planners and prioritize those who were legally bound to prioritize my financial wellbeing.

Following closely is the understanding of fee structures. The realm of financial planning is laden with a variety of fee structures, each with its own implications. Some financial planners operate on a commission basis, where they receive a certain percentage of the money invested in the financial products they recommend. While this model can be cost-effective for those seeking limited advice, it may potentially lead to a conflict of interest, with the planner potentially recommending products that yield higher commissions. Others adopt a fee-only model, which entails a flat fee, hourly charges, or a percentage of the assets managed. This model minimizes conflict of interest but may be more costly. A comprehensive understanding of these fee structures would have allowed me to select a planner that was not only cost-effective but also well-aligned with my financial goals.

Another overlooked aspect was the importance of specialization. Just as in medicine, where we have cardiologists for heart conditions and neurologists for brain-related issues, financial planning also has its own array of specialists. Some planners specialize in retirement planning, while others focus on investment or estate planning. Given the complexity and breadth of financial planning, having a specialist handle your specific needs can be an invaluable resource. I wish I had known this earlier, as it could have saved me from generalist planners who, despite their best intentions, may not have had the depth of knowledge required for my specific financial goals.

The importance of financial planner certifications is another point I wish I had been aware of. In an industry rife with confusing titles and designations, a recognized certification like Certified Financial Planner (CFP) can serve as a mark of credibility. CFP holders are required to pass a rigorous exam, have a minimum of three years of relevant professional experience, and adhere to a code of ethics. Had I known this, I could have made a more informed choice, selecting a planner with a proven track record of competence and integrity.

Finally, I underestimated the value of an ongoing relationship. Financial planning is not a one-time transaction. It is an ongoing process that adjusts your financial strategies as your life circumstances and financial goals evolve. Thus, finding a planner who is interested in building a long-term relationship is crucial. This continuity allows your planner to understand your financial situation in depth, anticipate changes, and make proactive recommendations.

In retrospect, these are the aspects I wish I had known when I started my journey with financial planning. The realization of these invaluable lessons has been the fruit of experience and self-education. But as the adage goes, “Experience is a hard teacher because she gives the test first, the lesson afterward.” It is my hope that sharing these insights will spare you some hard-learned lessons in your financial planning journey.