Knowing how to choose a financial planner is critical to your financial success. Make the right choice and you will be in the best position to make wise investments. Choose wrong and you may suffer negative long-term consequences to your portfolio.
Before you rush out to hire a financial planner, you should educate yourself about what a financial planner does and set expectations for what you want from your financial planner.
What Does A Financial Planner Do?
A financial planner is a professional who you hire to analyze your financial position and your financial goals then put together a plan for you to get from where you are to where you want to be. A financial planner will create this plan by showing you different investments and insurance products, showing you ways to reduce your debt and save for major purchases. A good plan will contemplate all your financial goals and work towards those goals.
What Do You Want In A Financial Planner?
Different people what different things in a financial planner. You should decide what is most important to you...personality, knowledge, access to the financial planner, the cheapest rates. If you're like me, you want it all, so list the desired qualities from most important to least important and rate financial planners you interview in each area of importance.
Now that you're ready to hire a financial planner, how do you make the right choice...by asking the right questions.
Five Essential Questions To Help You Choose A Financial Planner
1. What qualifications do you have? When choosing a financial planner you definitely want to know that they are qualified to advise you in making your financial decisions. Ask how long they have been a financial planner; how many clients they have worked with in those years, and whether they are certified by a reputable organization. The financial planner could be a certified financial planner, a certified public accountant-personal financial specialist, or a chartered financial consultant. There are a couple of websites you can use to verify the financial planner's certification: www.cfp.net and www.fpaforfinancialplanning.org.
2. What services do you offer? Some financial planners create comprehensive plans that include investment advice, retirement planning, wealth management, college savings, and other financial services. While other finanicial planners, usually those who are commission planners, sell products such as life insurance. Find out what services the financial planner you are interviewing provides.
3. How will I pay for your services and what is the average cost for your services? There are three primary ways that financial planners are paid, fee-only and percentage-based. Fee-only planners are best for anyone who can afford to spend $150 to $400 per hour in exchange for a planner who is readible accessible and able to creat a comprehensive plan. Commission planners are appropriate for new investors who cannot afford to pay the fees of a fee-only financial planner.
4. Have you ever been publicly disciplined in your professional career? Find out what organizations the planner is regulated by and contact these organizations to do a background check on the financial planner.
5. Will I be able to review all transactions? You should be allowed to review all the transactions the financial planner makes on your behalf. If the financial planner does not answer this question in the affirmative, proceed with caution because your relationship with your planner should be based on trust, honesty, and openness.