Choosing a Financial Planner

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There’s always a trigger. Something happens in your world that makes you think that maybe you should seek out a financial professional. Maybe it’s the time you realized that retirement was on the horizon and you are going to be facing a lot of financial decisions that are too important to get wrong. Maybe it’s when you get a buyout offer on a pension from an old employer. It could be the death of a spouse or a parent. Or maybe you’re just getting started—getting married, buying a house, paying off student loans, etc.

Whatever your trigger, once you’ve decided that you could use some help, the next step is to find a good advisor. There’s no shortage of financial advisors, so finding one won’t be a problem. The challenge will be selecting the one that is best for you. That’s not necessarily an easy task because of all the types of advisors available. This post will try to help you work through the process of finding an advisor that’s perfect for you.

First, you need to determine if your situation calls for a financial planner or another type of financial advisor. While they sound similar, there are often big differences. Some advisors work for investment companies or brokerage firms. They can help you select and manage your investments. Some work for insurance companies. They can help you select the policies that you need to protect your assets. Still others work for banks. They can help you choose the right kind of deposit accounts and loans.

A lot of times, the lines are blurred between the types of advisors. Investment advisors will often offer insurance products like annuities. Insurance advisors might offer mutual funds or other investment products. Bank advisors might offer investments and insurance products along with their other services.

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A real financial planner will offer advice on investments, insurance, banking products, and more, taking a holistic approach with their advice. They can help you bring it all together, making sure that all the pieces of your financial life are working together, helping you work toward your life goals.

So, how do you pick a financial planner? First, look at their credentials and qualifications. A CERTIFIED FINANCIAL PLANNER™ (CFP®) professional has gone through an intense educational program on the various aspects of financial planning. To maintain their certification, they must adhere to a code of ethics and take ongoing continuing-education classes.

It’s also important to work with a planner who is always working in your best interests. Ask any planner that you interview whether their work with you will be in a fiduciary capacity. Many advisors/planners are subject to only a suitability standard when it comes to recommendations.  There’s a big difference between the two. You should make sure your planner is always working in your best interests, which means they should be a fiduciary.

Next, consider the way you will be paying for your advice. We recommend that you work with a fee-only planner. A fee-only planner is compensated for the work they do for you—not by selling products. Some planners receive a percentage of the assets that they manage for you. Others get paid by the hour, more like an accountant or attorney. And some planners are compensated under some variation of a fixed-fee model. Make sure you understand how your planner is paid.

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There are several good resources to help you in your search for a planner. The National Association of Personal Financial Planners (NAPFA) offers a Find An Advisor site that allows you to search for planners based on your zip code. NAFPA advisors must be a CERTIFIED FINANCIAL PLANNER™ professional and operate under a fee-only compensation model. The Financial Planning Association (FPA) offers Planner Search, another database of advisors that is searchable by zip code. The Fee-Only Network also maintains a database of advisors who work under the fee-only model.

The CFP Board, the organization that sets and enforces the standards for CERTIFIED FINANCIAL PLANNER™ certification, can help as well. They offer a variety of resources on their site. One very helpful piece is Ten Key Questions to Ask When Choosing Your Financial Advisor.

Choosing someone to help you develop a long-term strategy to meet your goals and to help you make the many financial decisions that you will face as you go through life is an important decision. I hope this post can help you make sure to get it right.

Schedule a 15-minute discovery call with a fee-only financial advisor to discuss your personal situation.