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Personal Financial Planners

The rise of financial planners

Some people enlist the help of Certified Financial Planners (CFP) to help them make sound financial decisions. The number of financial planners in America has grown very quickly in the recent past. This trend is due to a few reasons:

First, the personal wealth in this country (the U.S.) is a lot higher than it was 20 to 30 years ago. The number of hosueholds with a net worth of over a million dollars has risen sharply during this time.

Second, the financial world has gotten much more complicated. A few decades ago, there was much fewer financial choices - mainly savings accounts, bonds, stocks, and mutual funds. Today, we have a more complex tax system and many more financial products available, such as: international investments, retirement accounts, ETFs, and options.

Third, there has been a shift away from third-party risk to first-party risk. Back in the 1960's when pensions were the main retirement savings vehicle, companies shouldered the employee's retirement investment risk. Today, a worker's retirement assets is usually in the form of a 401k, where they shoulder the risk themselves. This increased risk requires more planning.

Fourth, a retired person today is now expected to contribute more to their financial well-being during retirement. Previous generations assumed that Social Security would be enough to retire on. Therefore, long-term personal finance decisions were outsourced by default. Today, people have more responsibilities when it comes to their own long-term financial well-being.

Fifth, the growth of available financial information has made people aware of their financial needs. Although most people are still financially illiterate, the abundance of financial information available through publications and media (CNBC, books, and magazines) lead people to seek out help with financial issues by going to a financial planner. Ironically, much of this attention paid to financial planners is a result of the growth of the self-help personal finance industry. For financially illiterate people, self-help personal finance books (like Suze Oman's) will point out many of the financial issues that a person needs to pay attention to. But the complexity of the material (combined with the superficial coverage of some of the books) overwhelms many of the readers, who then (rightly) seek out help.

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