A good financial planner can help you prioritize your financial objectives – everything from saving for your first home to planning your retirement. He or she can also help you develop long- and short-term strategies for meeting those goals. How can you tell whether a financial planner is right for you?
Here are some questions you can ask to help you make this important decision:
What are your qualifications? Your planner should:
- have a background that includes a degree in financial planning or a related field.
- belong to a reputable professional group such as the Financial Planning Association or the Registered Financial Planners Institute.
- hold a professional designation that requires education and experience. There are dozens of professional designations in the U.S., including Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), and Personal Financial Specialist (PFS).
What is your area of specialty? Some planners work with clients from specific income levels, professions or age groups, such as high-net-worth clients, members of the legal profession or senior citizens. Many planners specialize in particular products or services, including retirement planning, investment advice, insurance, tax advice, estate planning and debt counseling. If your planner is not qualified to provide you with all the services and advice you require, he or she should have a working relationship with lawyers, investment advisers and other professionals who can fill any gaps in your financial plan.
What is your financial philosophy? You want to make sure that you and your financial planner are on the same general wavelength. If you are very conservative with your money, abhor debt and don’t like taking any risks with your savings, for example, you will not be comfortable with a planner with an aggressive approach, who might recommend you buy stocks on margin or put up venture capital for entrepreneurs. On the other hand, if you hire someone whose approach is exactly the same as yours, you won’t derive as much benefit from the relationship. You’re looking for a happy medium – a planner who has a similar philosophy, but can bring some new ideas to the table.
What do you need to know about me? A good planner wants to know your overall financial circumstances as well as your priorities, objectives, investment time horizons, tax situation, lifestyle concerns and attitudes toward risk.
Can I have references and sample plans? The planner should be able to provide names of at least three clients with financial goals similar to yours, plus sample plans.
Will I be working directly with you? If you’ll be working with an associate, meet with him or her instead.
How long have you been in business? Although newcomers can be brilliant, it’s probably best to start with someone who’s got some experience.
How are you paid? Before you meet with a financial planner you are considering hiring, make sure you won’t be charged for the initial interview. At the end of that interview, ask for an estimate of how much the services you require will cost you. Financial planners earn their income through fees (a flat fee or hourly rate), a combination of fees and commission, commission only, or through a financial arrangement with their company.
How will you keep me informed? You should receive a full report once a year, and meet face-to-face at least once a year to review your overall portfolio.
Have you ever been sued by a client or disciplined by a regulator? Financial planners who are also investment advisers – and therefore are qualified to advise you on investments like stocks, bonds and mutual funds – have to register with either the Securities and Exchange Commission or the state securities agency where they have their main place of business. You can find out if planners have been sued by an unhappy client or disciplined by any government regulator for unethical or improper conduct by accessing their “Form ADV”, which is filed with either the SEC or the state securities agency.
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