Money Monday: Tips for Choosing a Financial Planner

Money Monday: Tips for Choosing a Financial Planner

Money Monday: Tips for Choosing a Financial Planner

Don’t sign up for the first financial planner who comes along. Use these valuable tips to make the right choice in this very important matter.

Published October 15, 2012

Up until now you probably handled financial matters on your own. Maybe you were in college and are now working full-time, perhaps you just got married, or maybe you recently moved into your own apartment. Regardless of the life change that you’re going through, chances are good that a financial planner can help you make some solid choices today and in the future.


Financial planners come in all shapes and sizes. Before you pick one, consider these five tips for selecting a professional who will work in your best interest and guide you in the right direction:


1) Look for a financial planner with the letters “CFP” after his or her name. These folks have passed a rigorous test administered by the Certified Financial Planner Board of Standards about the specifics of personal finance. CFPs also have to take ethics classes and continuing education in order to keep their designations current. 


2)  Learn how to discern between commission-based and fee-only planners. Commission-based planners take a cut of the profits that they generate for you, and some charge per transaction. Fee-only planners (typically members of an organization called the National Association of Personal Financial Advisors [NAPFA]) generate revenue through client fees (hourly, retainer, or both) that typically equal about 1 percent of your annual assets.


3) If you’re just starting out, consider picking an hourly-based planner. These planners are usually new to the business and eager to build their companies by referrals. They can help you with investments, taxes, retirement planning, and myriad other financial matters on a per-project basis. Over time you may want to transition to a more “holistic” approach — with the planner on retainer year-round — but for now having a professional working in your corner on an hourly basis may be enough.


4) Ask your bank about free resources and services. Many banks offer their customers free basic financial guidance, as well as access to free online tools and information regarding financial management. If you don’t have the funds to spend on a financial planner today, this might be a good option until you do.


5) Ask some important questions upfront. When you sit down with your prospective advisor, be ready to ask a few important questions, including: What is your background? Do you work with clients who are similar to me? How do you get paid? How much can I expect to pay per hour, month, quarter or year for your services? How will we meet and how often? Can I speak with a few of your clients whose financial situations are similar to mine? If you’re not happy with any of the answers you get, move on to another planner.


Remember that the right planner could be on your payroll for years or even decades, so choose wisely. Start small by requesting help with specific decisions (how to purchase life insurance) or projects (setting up a retirement account), and then parlay those early experiences into a long-term relationship with a qualified, reputable financial planner. 


For a detailed list of questions to ask before hiring a planner, check out NAPFA’s online resource: How to Choose a Financial Planner — Tough Questions to Ask.

This article has been prepared for informational purposes only. The accuracy and completeness of this information is not guaranteed and is subject to change. Since each individual’s financial situation is unique, you need to review your financial objectives to determine which approaches might work best for you.


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(Photo: GettyImages)

Written by Bridget McCrea


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