How to choose a Financial Planner
Financial planning isn’t just for the wealthy. Having a financial plan increases the odds that you’ll reach your long-term financial goals, because you have taken the time to set targets and establish a realistic plan to reach them. Depending on your background and goals, you may be able to do this yourself. But in these financially unsettled times, many formerly self-directed investors are feeling the need for some professional guidance. Or you may be at a new juncture in life. Perhaps you’ve been able to handle your investment strategy just fine, but now you’re about to retire, and you wonder how much you can safely withdraw from your investments each year or where you should be investing your money for the safest, yet highest return. If you don’t have the time or expertise to tackle these tasks yourself, an objective third party can help you cut through your confusion and procrastination. As the saying goes, advice that makes you money – or saves you money – costs you nothing.
Finding the advisor who best meets your financial needs is an important education process in itself. Financial planners (also called financial advisors or financial consultants) generally look at your overall financial situation and design a complete strategy to help you meet your financial goals. Some may specialize in a specific type of financial planning, such as investment, estate and trust planning, or retirement planning. Others may look at the whole picture, not only providing investment advice but also offering advice on insurance coverage, long-term care needs, and tax, retirement, and estate planning. Anyone can call him- or herself a financial planner. There are no minimum licensing or educational requirements that must be met in order to put that title after your name. Make sure that the person you trust with your money is qualified to provide good financial service. Look for credentials and know what they mean. Financial planners can earn these designations by completing accredited courses of study. The most common one is CPFA.The NISM-CPFA certification is a course offered by the National Institute of Securities Markets (NISM)
The person you hire should not just be competent, but also someone you can trust. Here are some steps to help you find the right person for you.
Review your financial situation.
First of all, gather your financial records and review your personal and financial situation. Take some time to think about what you want to accomplish and decide what kind of help you need. Figuring out the kind of advisor you want will help narrow your search and determine how much you pay. If you have no idea what you need, perhaps your first step is to have someone help you get a picture of your spending patterns, assets, insurance, income, and short- and long-term goals.Develop a list. Once you’ve established what you’re looking for, you can begin your search using Google.
Schedule and conduct interviews
Next, schedule and prepare for personal interviews These initial half-hour- to hour-long interviews are often free – make sure to verify this when you schedule your appointment. Also, check to make sure the person you’ll be meeting with is the one who will be your advisor. For couples, both partners should go to the interview. Each partner should feel comfortable with the advisor selected. Remember, statistically women can be expected to outlive their male counterparts.
Ask good questions.
Bring a checklist of questions or issues you would like addressed with you to the interviews. You are interviewing the advisor for a job – and the advisor is interviewing you. As well as inquiring about investment experience, professional background, and education, you’ll want to ask what strategies or principles the planner uses to develop financial recommendations. Find out what you can expect the planner to do for you. Request a copy of a typical financial plan. If you haven’t gotten it already
Bring along financial documents In the initial meeting the advisor will want to get a picture of your financial situation. Speed this process along by bringing the information with you. The advisor you choose will need this documentation anyway, and if you provide it up front in writing, there’ll be more time for you to ask the questions you’d
like answered. You should bring: a rough outline of your monthly budget including an estimate of monthly expenses, recent tax returns, sources of present and future income, recent account statements for retirement plans, recent bank statements for all accounts, a list of major assets and estimated market value, a recent statement from all open credit card accounts, and a copy of life, and health insurance.
Know your cost.
It is a fact of life that financial advisors need to be paid. Some planners work for a fee, some work on commission, and some combine commission and fees. Some fees may be based on an hourly rate, others on a specific charge for a specific service, still others on a percentage of a client’s income or asset base. You are responsible for finding out how the planner is compensated and what you are paying for.
Make a choice.
Evaluate and reflect on each interview. Check the performance record of the firms and planners you are considering. Get several references from each prospect of current and former clients – especially of clients with goals similar to your own., and take the time to check them. Do not rush. It’s important to select the
planner who best meets your needs and with whom you feel comfortable. When you initiate the formal relationship, be sure to discuss the scope of the plan and have mutually-agreed-upon expectations of the outcome. And get it in writing. You should receive a letter of engagement, which lays out the planner’s responsibilities and expectations, and yours as well. Remember you need to educate yourself and be involved in the financial planning process. Always read the entire document before signing it. Take it home with you to read, if you need to. Make notes of items that need clarification. Ask questions about everything you don’t understand. Implement your plan. Finally, remember that you must do your part. The best financial plan in the world is useless if you don’t implement it. A planner may help you plot the course, but you are in charge. The decisions and the responsibility rest with you.