How to Select a Financial Planner
Working with a Financial Planner
Financial planners serve an important purpose in today’s world. You’re a busy person – you work hard every day and you just don’t have time to figure out how to best allocate your investments or how to plan ahead for your retirement. That’s okay – there are plenty of financial planning professionals available today who can help you with these needs. Here’s how to choose the right one for you:
What are Your Specific Needs?
Everyone is different – maybe you need help determining how to invest an inheritance you received, or maybe you just need a little advice on how to be sure you’re on track for retirement. That’s why the first step to selecting a financial planner is determining why you need this advisor in the first place. Performing this self-evaluation will also help you decide which type of professional to contact. For example, a Certified Public Accountant (CPA) is the best choice to handle your tax-related issues, while a Certified Financial Planner (CFP) will be able to handle a wider range of concerns.
Seeking Out Recommendations
Once you’ve decided what type of financial planner you need, you’ll need to narrow down the field. In any given city, there may be dozens of CPAs or CFPs – how do you know which one is right for you?
Just like you’d ask around for recommendations on a new doctor or hairstylist, solicit advice on local financial planners from your friends, relatives and neighbors. Ask who they’ve used before, what they liked and didn’t like about the planner and whether or not they’d recommend the planner to you. Person-to-person advice is some of the most honest information you’ll get – at the very least, it’s a more reputable source of referrals than the direct mail flyers you receive or the “true story” testimonials the planner has featured on his or her website.
Conduct Financial Planner Interviews
After soliciting referrals from your friends and acquaintances, you should have a short list of financial planner candidates that interest you. Gather as much information on them as you can from the phone book and internet and then call to set up an initial consultation. This meeting should be free and will give you a chance to meet the financial planner and learn more about his or her money management philosophy.
One of the first things to ask in these interviews is how the planner is paid – which is typically by commission, a flat fee or a fee based on your assets. A commissioned sales person makes a percentage off of every purchase that you may make, a situation which obviously sets up the potential for abuse if the planner tries to pressure you into a particular sale. Planners who charge flat fees typically bill by the hour or by a set fee for a particular service (for example, a set amount for a comprehensive financial plan), while other planners charge a percentage of the assets you invest with them as an annual fee. There’s no one way that’s right or wrong, but it’s important that you feel comfortable with the pricing structure the planner uses.
Finally, don’t be afraid to trust your instincts – after all, this is your money we’re talking about! After interviewing all of your potential candidates, do your best to choose the one you have the most confidence in and who you feel has the best long term plan for managing your money.