People often try to follow our advice to use a personal financial planner to help them with their finances. But then, they get held up choosing one and getting started. Oftentimes, they just don’t know how to find and pick one they think is competent enough to make them feel confident in their choice. So, here are a few things to consider when you are looking to hire your own financial planner.
First, understand why you need a financial planner.
The goals of almost all people’s financial plans comprises:
- creating and learning how to live on budget that will allow you to
- get out of debt and
- enjoy your optimal standard of living and
- will allow saving money and investing it
for whatever your life may bring, whether it be having a family and working until and after a healthy retirement or dealing with whatever disaster, disease, disability, or death comes along, and then to be able to help those they may have to leave behind.
Because financial planning is a dynamic lifecycle process, your financial goals may change over the years as your lifecycle events shift your lifestyle or circumstances such as an inheritance, career change, marriage, house purchase or a growing family. Once you get out of debt, you will then need to work on saving money on a regular basis, then you will need help putting together an investment plan that balances possible risk with desirable rewards, reduces investment fees, and taxes.
Doing effective and efficient financial planning means working with someone who can help you see how you are earning and spending your money in your recent past, your present, and your future.
Second, deal only with fee-only financial advisors and planners.
At LifeCycle Law, we only recommend working with fee-only financial planners instead of those who earn commissions on the financial products and services they recommend. Some fee-only planners charge by the hour, while others charge some percentage of your assets (if you have any assets in excess of your liabilities), and still others work for a flat fee for a specific set of financial planning services. Whether it is the first question you ask (which we do not recommend) or the last question you ask (which is a better time to discuss fees), once you get the answer, you will know what you’re paying, what you’re paying it for, and whether your advisor has any financial conflicts of interest when recommending investments.
Third, look for education, training, and experience and not just certifications.
Not all financial planners are “certified.” While anyone can call themselves a “financial planner,” there are differences in the education, training, and experience each financial planner has. Some financial planners are formerly or even currently practicing accountants. Others are lawyers who have additional accounting and/or financial planning education, possibly an MBA in financial management.
One common, but pretty good, certification is the CFP designation granted by The Certified Financial Planning Board. The CFP Board is a non-profit organization that acts in the public interest by fostering professional standards in personal financial planning by setting and enforcing specific education, examination, experience, ethical, and other requirements for CFP®certification. Only those who have fulfilled CFP Board’s rigorous requirements can call themselves a CFP®professional.
The Chartered Financial Analyst® (CFA) credential is held by over 150,000 professionals around the world. The charter gives a strong understanding of advanced investment analysis and real-world portfolio management skills. An integral part of the CFA Institute mission is to develop and administer codes, best practice guidelines, and standards that guide the investment industry and help ensure all investment professionals place client interests first.
A Personal Financial Specialist (PFS) is a Certified Public Accountant (CPA) who meets the financial planning requirements established by the American Institute of Certified Public Accountants (AICPA).
Some financial planners are certified and some are not. If you only consider certifications, be sure you understand the certification claimed by your financial planner candidate. Money Magazine has an online article that discusses a lot of the various designations a financial planner may sport. Read it here. It’s pretty scary and enlightening.
Fourth, meet with and ask your prospective financial planner a lot of questions.
If a prospective financial planner will not sit down with you for a complimentary initial conversation, then choose someone else.
Once you get face-to-face with your prospective planner, there are a lot of questions to ask. You will only have time, however, for about 10. We already discussed a few of them. Here are some more to discuss before those
- What are you going to do as my financial planner?
- How are you going to do it?
- How are we going to figure out, as we work together, how we are doing at it?
- How do you expect to be paid?
- What financial planning certifications do you have?
- What makes you different from mere mortal financial planners?
- Why did the last few clients who left you leave?
- What questions do you want to know about me; my current financial facts, circumstances, and plan?
- What basic recommendations would you make based on my basic answers to those basic questions?
- What does your initial financial plan document look like and will you show me a few of them after redacting them as needed?
- How quickly will you get back to me if I call or send you an email?
- How good are you at practicing what you preach and are you willing to show it to me?
If anything your prospective planner says while discussing these ten things gives you pause, then finish the full discussion and talk about any issues you may have. If the prospect doesn’t want to help you feel as comfortable as possible, then go somewhere else.
Some people don’t need financial planners, so we are told. But, we haven’t met many of them. Almost all of our clients can use a financial planner. And we would be happy to work with both you and yours. Call us for a free discussion at 410-525-3476 of 410-LCL-FIRM.