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How to Choose a Financial Planner

Do you need a financial planner? Are you interested in finances, but lack the time to study them? Does personal finance hold no interest for you? Do you need help getting on track with your finances? Have you accumulated some wealth, or do you earn a steady and good income? Do you want help assessing the state and direction of your household finances? You may want to hire a financial planner.

To Choose a Financial Planner, Know Your Needs First

Know what kind of help you are looking for with your finances. Do you need debt help? Retirement planning? A broad look at your entire portfolio?
Know your tolerance for risk, particularly if you want help with investment planning. Are you able to deal with stock market volatility, or do high risk investments cause you undue stress? Knowing your risk tolerance will help a financial planner assist you better, but your risk tolerance may also help you choose a financial planner whose philosophy may be close to your own.

A qualified financial planner can help you design a broad financial plan for your household. A plan like this will likely address monetary goals, household budget, retirement investing, estate planning, the allocation of your assets, and a review of insurance needs. While a financial planner is not a substitute for a lawyer, an accountant, or an insurance agent, the financial planner may be able to coordinate with these professionals to implement your household financial plan.

Ask for Recommendations, then Interview

Choose family, friends, co-workers, or people in your life that you trust. Ask them if they use a financial planner, and if they can recommend one.
Interview financial planners that you think may be a good fit for you. Ideally, a financial planner should not charge you for this informational interview.
Get a sense for the planner’s philosophy, style, and way of thinking. Note whether the financial planner seems knowledgeable, honest, and whether the planner is a good listener. Ask yourself if you’re comfortable having this person help you handle your finances.
Does the planner have a broad knowledge of accounting, tax, investing, and insurance considerations? Is the planner qualified and objective? Is the planner certified?

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Understand the Different Ways that a Financial Planner May Charge Fees

Some financial planners charge a straight fee per hour or an annual fee (these are called fee-only advisors). Some planners make a commission if they succeed in selling you a particular investment. If you are uncomfortable with the latter arrangement, find out ahead of time what the planner’s fees are based on, and how they are collected. A commission-based financial planner may be less likely to be interested in helping you develop a broad household plan, and more interested in trying to sell you a specific product. In many cases, the complexity of your investments and your goals may influence the price you pay for financial planning services. Find out about pricing structure before committing with a planner, and agree to it ahead of time, or negotiate.

Check the Financial Planner’s Credentials

When you find a financial planner you’d like to work with, make sure they have state or federal licensure. The planner’s Form ADV (which is proof of the planner’s registration with the Securities and Exchange Commission) should be available to you upon request. The securities agency that is part of your state’s governmental offices will have information on state financial planners and records of their Form ADV, as well as stockbrokers’ CRD documentation (CRD stands for North American Securities Administrators Central Registration Depository). Check with the Better Business Bureau (http://www.bbb.org) for any complaints concerning the financial advisor. Your State Bar association may have information if the financial planner is also a lawyer. Your State Accountancy Board may have information on the planner if she or he is a CPA. Check the Web Site for American Financial Planners (http://www.american-financialplanners.com) for credentials that financial planners need to satisfy.

Further Resources

The following Web sites have information about the qualifications of financial professionals, and databases to locate a financial professional near you.

·         The National Association of Personal Financial Advisors: www.napfa.org
·         International Association of Registered Financial Consultants: www.Iarfc.org
·         The American Institute of Certified Public Accountants: www.aicpa.org
·         Certified Financial Planner Board of Standards, Inc.: www.cfp-board.org

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