Financial Planning - How to Choose a Financial Planner

How to Choose a Financial Planner

By asking the right questions of a candidate, you should be able to identify someone you would be comfortable dealing with:

1. Do they follow the complete process of financial planning? After data-gathering and identifying your financial and personal goals, will they provide you with a personalized written plan with alternative solutions and recommendations? Can they help you implement the plan? And most importantly, will they review and update your plan as you and your situation change?
2. How is the planner paid and approximately how much will the financial planning fee be? The planning fee usually depends on the complexity of the situation, but you should get a ballpark figure. A planner who charges fees and gives investment advice should be registered with the Securities and Exchange Commission as an Investment Advisor, or be employed by an entity that is registered. The SEC requires that Investment Advisors give you a brochure (ADV Form) that disclose their qualifications, the extent of their services, how they are paid, and any potential conflict of interest they may have.
3. What are the planner's qualifications and credentials; whether it is Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC) and/or other degrees that they might have? A minimum of 10 years experience in planning and/or a background in law, investments, or accounting is useful. For a listing of planners in your area, click onto the search engines of the Financial Planning Association (www.fpanet.org) and National Association of Personal Financial Advisors (www.napfa.org), the association for fee-only planners. A planner can be certified and be a member of the FPA and NAPFA and still not be the person you want to have handle your financial affairs; but the chance of being satisfied with his/her work is higher if the planner is active in recognized professional associations.
4. Is the planner truly independent or does he/she work for a manufacturer of product, such as a real estate syndicator or insurance company? A conflict of interest may exist if the planner is committed to proprietary investments or lines of insurance. Objectivity and impartiality are of utmost importance in implementing any plan to truly benefit you. What licenses does the planner hold? If a planner holds only one license and is dependent for his/her income on the commissions paid from the sale of one or two products, he/she may be heavily biased in favor of selling those products.
5. Is the person a sole practitioner or do they have other planners and staff to help them? It is very difficult these days in the complicated field of financial planning to be a sole practitioner and know all things. It is becoming imperative that someone be a member of a firm where there are several planners with expertise in different fields working cooperatively, backed up by staff and computers to keep them current.
6. Are you personally comfortable with the planner? Do you feel that you could tell him/her everything there is to know about your financial life and some of your personal life? This rapport is necessary for financial planning to be successful. Trust between client and advisor is essential to successful planning. Are you willing to rely on the judgment of this person when it comes time to make a decision regarding your future retirement, the education of your children, or the planning of your estate?