Financial
Planning
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:
- 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?
- 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.
- 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. The International Association for Financial Planning (IAFP)
and/or the Institute for Certified Financial Planners (ICFP) are two
associations to which the planner should belong. This is such a complex
field it is important that the planner keeps current and these organizations
help to do so. An active ICFP membership requires annual continuing
education credits to be earned. A planner can be certified and be a
member of the IAFP and ICFP 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.
- 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.
- 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.
- 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?
