How to Choose a Financial Planner

Are you on the lookout for someone to advise you on financial issues that go beyond basic investing? The right person may be a financial planner. Planners come in all types. Some focus on investments; others work in planning insurance, budgeting, estate and related issues. But as with almost anything in the world of money, caveat emptor.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• References
• Recommendations

1. Be clear on what your life goals and objectives are when searching for a suitable planner. Do you want a comfortable retirement, a college education, a vacation home, capital to finance a career change or something else?
2. Decide whether you need the resources of a full-service national firm or if a local office will be sufficient. National firms have big-name investment researchers and analysts on board to generate their own opinions. Generally, the more services available, the higher the overhead a firm has to cover and the higher the fees charged to its clients. In many cases, access to research information more than makes up for the added fees, but be sure you'll actually take advantage of them before you pay them.
3. Ask friends and colleagues for recommendations and references. Try to interview at least three planners. Find someone who understands the debt (mortgage, car loans, etc.) side of your equation and will take that into account when creating your plan.
4. Check the planner's credentials. Certified financial planners have passed exams covering a number of financial topics. Others may have designations in certain fields such as investing and insurance. Contact American Financial Planners (american-financialplanners. com/credentials.html) for a list of financial planner credentials and the organizations that provided them.
5. Get a feel for the planner's philosophy. Some planners are flatout aggressive when it comes to investing, while others are more conservative. But it's your money, and any decent planner should be able to map out a plan that fits your needs and comfort level.
6. Make certain you know exactly how the planner will be compensated. Some charge a flat fee for setting up a financial plan; other planners sell products on a commission basis. Be sure to negotiate if you like the planner but the fee seems high.
7. Ask the planner for references, especially from clients whose needs are similar to yours. If the planner balks or talks about confidentiality, find someone else.
8. Establish how and how often your planner will be in contact with you. Will it involve phone calls, e-mail updates or quarterly reports? And if your finances take a downturn, will your planner call with feedback and reassurance, or will you have to pursue him or her?

What to Look For:

• Financial objectives
• Specific services
• Credentials and references
• Compatible philosophy
• Compensation basis

Tips & Warnings

• If a planner is part of a large firm, ask if you'll be handed off to someone else for things like taxes and insurance. Some people prefer one planner who'll handle all their financial dealings.
• Financial planners who are paid on a commission may try and steer you to invest in products that will yield them the best compensation rather than what is in your best interests. Fee-based planners are generally preferred for their objectivity.
• Ask about the charges for phone consultations and questions. It may seem like a quick question to you, but that 15-minute phone call may result in a bill. Experienced financial planners can charge up to $250 per hour or more.
• Make sure your investment pot is large enough to warrant getting a planner. If you only have $1,000 to invest and a planner is going to charge you a couple hundred dollars, you'd be better off learning what you need to do on your own.