There are three kinds of financial planners right? Ones that tell rich people how to invest, ones who charge you for things you could do yourself and ones that are scam artists – out to part you from your money. If you believed the mythology surrounding the profession, you might think so. But the truth is much more nuanced. Well, actually, most of these myths we hear are flat-out wrong.

Today we’ll examine where these persistent, apocryphal stories come from, whether there is a nugget of truth inside, and give you advice on how to keep the mythology from wrecking your money. [Editors note: When this article refers to a financial planner, it specifically refers to professionals that work with clients to create plans for achieving financial goals. Some of these professionals also go by the name financial advisor and may also manage money or provide other services on behalf of their clients]   

I can find all the financial planning information I need on the internet.

Have you seen the internet lately? This is the place that makes pick-up artist classes, acai pyramid schemes, and Reddit possible.  Sure, there are some good resources out there – a few blogs by financial experts that can give general advice, some news sites that will tell you what is happening in the financial world, inspiration from that couple that quit their jobs to travel the world, and the odd retirement calculator from a brokerage firm.

But first you have to put in the research, filter the good from the bad (thanks for the tips, random 19-year-old, finance major-to-be blogger!), then compare the information you find to your own personal financial situation and decide if it applies to you. It’s sort of like skipping your annual checkup in favor of looking up your symptoms on WebMD, then writing yourself a prescription for a medication you saw on TV. It’s dangerous and stressful.

A CERTIFIED FINANCIAL PLANNER™, or CFP® is just that: certified. They’ve gone through extensive schooling, have been tested on their knowledge by the nonprofit organization Certified Financial Planner® Board of Standards, and have completed qualified work experience. You would spend weeks, or more, researching all the information that a financial planner could tell you in an hour, since they have studied over 100 topics, including investing, taxes, insurance, retirement planning, and estate planning. A Chartered Financial Consultant® (ChFC®) also denotes vigorous schooling, though no final exam. In any case, these and other designations shows that your planner can give you personalized, smart advice about all aspects of your financial situation. If only all the internet were so vigorously verified!

Financial planning is a scam.

This idea comes from two sources: First, that story you heard about your mom’s friend’s uncle whose advisor churned through all his retirement money; and second, the allegation that financial planners will sell you financial products you don’t need so they get paid. Let’s address both.

Churning is when a financial advisor executes a lot of trades in order to charge you fees for each one, until your portfolio has been all but eaten up. There are bad apples in any profession, but most financial planners have gone into the field not so they can have access to clients’ money, but because they enjoy numbers and want to have a real, positive impact on people’s lives. And it’s pretty easy to weed out the bad guys. All you have to do is look up a potential financial planner on the SEC’s IAPD website, which lists public sanctions, suspensions, revocations and other items like criminal or civil incidents. If they are listed on GuideVine, they have also gone through a vetting process.

As for the second charge, this applies to financial planners who work for brokerage or insurance firms that are in the business of selling financial products, like life insurance, annuities, mutual funds, etc. There can be pressure at these firms to sell certain products to you, especially if these planners make a commission off of products. It doesn’t rise to the level of a scam, but it means more oversight on your part and part of the growth in your portfolio could be chewed up by higher fees. If this worries you, a fee-only planner, as discussed in this article on payment structures, should mean that your financial advisor has no conflicts of interest (or clearly spells them out to you).

All a financial planner does is pick investments.

Some financial advisors only manage investment portfolios. Which makes sense, given the complexity of the financial markets, and the time it takes to research even one stock or fund. But if the person is a financial planner, they will look holistically at your entire financial situation. So maybe the best plan for you involves investing, maybe not. Perhaps before you start looking at equities your planner will recommend you put that money in a savings account, pay off debt, buy life or disability insurance, or something else. It’s all up to your personal preference, values and goals.

I’ll get a financial planner when I have so much money, I don’t know what to do with it.

Wouldn’t that be nice? If you actually have no idea what to do with that extra $50,000, then yes, you should really get a financial planner. But most of us would benefit from a financial planner long before that, to help get to the point where we can have an extra $50,000 at all!

A financial planner, especially a fee-based one, is especially helpful if you’re saving up for a house, getting married, having a kid, starting a business, getting a raise or bonus, picking out life insurance, wondering about retirement, or any other complex financial decisions and milestones. Even if you’re in a situation where you have a comfortable salary but don’t know where your money is going, the right financial planner can puzzle that out for you and give you strategies to get on track. No, you probably shouldn’t pay $150 an hour for advice if you are dead broke, but $150 an hour is a small price to pay for a plan that could boost your retirement nest egg by thousands.

I’ll get financial planning once and then be done.

To use the doctor metaphor again, you wouldn’t get one checkup your entire life, would you? While a financial planner may make a comprehensive financial plan for you to follow, your financial situation will change as your life changes. And, surprise! Everything won’t always go according to plan. You’ll want to meet with a planner again if you get married, get divorced, have kids, move, get a new job, get a raise, buy a home, sell your home, decide to start investing, and more. Your money goals will develop and change as well, from paying off debt, buying a home, to retiring on an island. If your financial situation and goals are simple, a yearly checkup and/or portfolio rebalance might be fine, but some people do best with a monthly financial checkup, or like to have their advisor on call.

The point is, you can’t put your financial life on autopilot after just a few meetings with an planner.

A good financial planner will look at my numbers and tell me what to do.

Many of us would like financial planning to be like a workout class: show up, do what the instructor tells us, and go home all sweaty and accomplished. Nope, this is a two-way conversation. And if you want to get the best financial plan, you’ll have to bring something to the table.

Your financial planner will request certain numbers and documents from you so they can run them through the system and extract some insights. But they’ll also have a discussion with you about what you want out of your money, how values impact your decisions and what your short-term goals, long-term goals, your concerns, and your weaknesses are. There could be ten different things to do with an extra $5,000 depending on whether you are running your own business, just had a baby, or want to go on a trip next year.  Whether you’re a risk taker or risk adverse affects their recommendations, plus where you live, and your fears about money.

You can help your planner give you the very best advice by being organized, providing them with everything they need, and being honest with them, and yourself, about what you are looking for.

After you’ve read this article, you may still feel a financial planner isn’t right for you … yet. And that is fine. But now you know that at some point in your life – if not now – you’ll want to get some professional advice, and now you know how to get it and what to expect. Go out and spread the good word to your friends. You’ll be doing them all a favor.


Alden Wicker

Alden Wicker

Alden Wicker is a freelance journalist specializing in personal finance and sustainable lifestyle topics. She lives in New York, and is an expert at finding new and interesting ways of generating extra income. Her biggest budget weakness is eco-friendly fashion. Follow Alden on Twitter and Google+