6 Questions to Ask Before Choosing a Financial Planner

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eHow Money Blog

Whether you need help merging finances with a partner, creating a budget or deciding how to invest for retirement, a financial planner can help you work toward those goals. A 2013 study by Northwest Mutual found that two-thirds of Americans do not have a long-term financial plan in place, and nearly three-quarters do not enlist the help of a financial planner. However, six in 10 adults believe their financial planning skills need improvement.

We talked to Michael Garry, certified financial planner and author of “Independent Financial Planning: Your Ultimate Guide to Finding and Choosing the Right Financial Planner,” about questions to ask prospective advisers before choosing one.

1. What qualifies you to offer financial planning advice, and do you hold any financial planning designations?
The financial industry has dozens of different acronyms, but CFP (certified financial planner) is one that Garry recommends. “I like it because it’s a good educational background and people have to uphold certain ethical standards,” he says. “It’s not tied to any specific industry.”

“It’s not very difficult to get licensed in this industry,” Garry says. “Passing a licensing test is not the same thing as being a competent financial planner. A lot of people who do this are career changers or sold a different product the week before.” Answers to this question may vary, but it’s up to you to decide if the response puts you at ease or raises red flags.

2. What’s your philosophy and approach to financial planning?
Ask this question to get a feel for a prospective adviser’s viewpoint. “There are people who want to get advisers who want to follow the latest trend,” Garry says. “Other advisers have a very holistic way of doing things. Some people who are very comprehensive or do a small amount of planning. All of them could be OK for different types of clients. The types of services or his or her philosophy should align with what you think yours should be.”

3. What type of client do you typically work with?
Ideally, you would choose an adviser who has clients with needs similar to yours, so she understands the financial planning challenges of blended families, self-employed people or whatever your case may be. “Some people only work with very wealthy people,” Garry says. “Some people prefer to work hourly with middle-class people. Find a planner who has comfort and experience within that market.”

4. Who will be implementing my financial plan?
In some cases, the adviser will implement the plan, while in others, clients are expected to implement plans on their own. “It depends on what the client needs,” Garry says. “There are a lot of cases where the planner can’t implement parts of it. For instance, if I uncover a need for life insurance, I can help the client find a reputable insurance agent or broker and analyze plans or different policies, but I can’t literally sell the policy to the client.”

5. What is your fee structure?
Asking about a financial planner’s fee structure is important not only so you can budget accordingly, but also so you can understand potential biases. For instance, an adviser who sells financial products on commission may charge little if anything for services, but that fee structure may incentivize the adviser to suggest one product over another due to higher commissions. “A fee-only planner is someone who doesn’t sell any financial products,” Garry explains. “The way they make money is managing your accounts for a fee or doing financial planning where you write a check to pay for the services. It could be based on an hourly charge or specific amount agreed to in advance.”

6. Can I have it in writing?
Garry suggests asking for the terms of your financial planning engagement in writing. That way, he says, “you know what the scope of the project is, what you can expect the planner to deliver, and how much you’re going to pay for it so there aren’t any surprises after the fact.”

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