7 Things to Look for in a Financial Planner

7 Things to Look for in a Financial Planner

April 08, 2021

A financial planner’s job is to help you figure out where you stand financially, and to design a cost-effective plan to meet your goals. However, anyone may call themselves a financial planner these days. It is important to be careful and inquisitive when selecting a professional. After all, their advice is not free.

Financial planning is an investment. There are fees associated with receiving service, but its returns are numerous over time. A comprehensive plan will add value on multiple fronts. By taking a birds-eye view on all financial matters such as income, spending, debt, investing, real estate, retirement, and more, the financial planner should be able to tell you how you can make the most of it, but you have to also be willing to pay for the advice.

Many people view financial planning as a solution to an emergency, or life-changing event such as retirement, divorce, or death. But if you decide to utilize a financial plan as an ongoing part of your life, you could be putting yourself on a better long-term course for your future.

You don’t need to have an in-depth understanding of the financial markets, tax law, or with business jargon. You may be busy with your career, family, or recreation. If you ask the right questions and state what you want, you will be able to find someone that is truly responsive to your needs with sound advice. Here are some questions you should ask when looking for a financial advisor:

1) What are your qualifications?

Training, experience, and certifications are the first things you should be looking for. What is their education? How long have they been in practice? You do not want to work with someone who is getting their education and experience with your money. Also, find out what certifications they hold. A CERTIFIED FINANCIAL PLANNER™ is the hallmark of the industry. They are a college graduate, with a minimum of three years of financial planning experience, completed a comprehensive course approved by the CFP Board, and who has passed the CFP® Certification Examination that tests both their financial planning knowledge and ability to give sound advice. Holding this certificate also maintains that they will be held to rigorous ethical standards, holding the clients’ interests first. Based on regular research of what planners do, the exam covers the financial planning process, tax planning, employee benefits and retirement planning, estate planning, investment management and insurance.

2) What services do you offer?

Anyone may call themselves a financial planner, advisor, financial coach, or wealth manager within the complex structure of financial services. What they offer depends on the company they work for, licenses, and areas of expertise. Without proper licenses, an advisor may only be able to advise you on particular investments such as insurance or mutual funds. Some advisors are specialists on specific categories of financial planning such as taxes, estate planning, or investments. Others are comprehensive financial planner that will take a look at your entire financial situation to give advice.

3) How do you charge for your services?

Professional planners are open and honest about the costs of their services. In the financial planning agreement, it is required to list the services that will be provided, and how the planner is compensated, which can happen in multiple ways:

  • Fees: Hourly rate, flat rate, or as a percentage of your assets under management.
  • Commission: Paid by a third party from products sold to you based on recommendations made by the financial planner.
  • Hybrid of fees and commissions based on both service and sales.

4) Do you have any potential conflicts of interest?

Conflicts of interest must be disclosed in the financial planning agreement. Still, there should be clear communication of how a financial planner profits on sales of investment products made to you.

5) Will you be able to teach and train?

Do not view a financial planner as someone you unload your finances on in order to forget about it. One who is experienced will be able to educate you about the decisions to make or will potentially make in the future. When you understand the financial planning concepts that are relevant to your life, you will have a better idea of what you want to do when it comes time to make a move.

6) What investments should I make to meet my goals?

Be prepared to describe your hopes, dreams, and desires for the advisor to be able to give accurate advice. Ask them how any particular investment or recommendation will help you achieve your goals. There is always a thought process behind their guidance as to how it is appropriate for your situation.

7) How can I expect this investment to perform?

There is a worst-case scenario for every investment. If your advisor is not realistic about the possibilities of an investment’s performance, you need another advisor. It is their responsibility to provide all the advantages and disadvantages so you can make a sound decision. For example, the stock market has had a compound annual growth rate of about 10% since its inception. However, this is a long-term average, and annual returns have dropped accounts values as much as -43%. Before buying anything, ask your advisor to show you a year-to-year history, a risk analysis, and how it is suitable for you.