Why and how to hire a fee-only financial planner
At some point, everyone needs a financial planner.
Think about听your financial health the way you think about your physical health. You can do a lot on your own, and you might not need a doctor very often. But many听people regularly see the doctor anyway, just to check in and make sure everything鈥檚 OK. If something is wrong, that checkup might turn into a more significant visit.
As time goes on, your health starts to change and you have to deal with things you didn鈥檛 deal with before. The same is true for your finances.
Two questions to ask
When you start looking for financial help, you鈥檒l find plenty of people willing to provide it. But are they looking out for your best interests, or their own? Financial service providers go by听听鈥� broker, broker/dealer, advisor听representative and financial planner, to name a few 鈥� but when you鈥檙e looking for one, you really need to ask only two questions:
1. Are you a registered investment advisor or a broker/dealer?听Simply put, registered investment advisors (RIA) are legally obligated to put their clients鈥� interests first, even if it means they鈥檒l be paid less. This is known as the听fiduciary standard.
By comparison, broker/dealers are not held to the听, but instead are held to the听suitability standard.听This means that the firm or associated person must have 鈥渁 reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer鈥檚 investment profile,鈥� according to the听, which oversees these firms. None of this language indicates that the representative has to put a client鈥檚 interests first.
2. Are you fee-only, or do you accept other forms of compensation, like commissions?听Investment advisors must disclose how they鈥檙e compensated in a filed document, known as an ADV. Part of the ADV form discloses how an advisor is compensated, whether it鈥檚 through fees, commissions or some other way. If asked, advisors must answer in the same way they outline their compensation in their ADV.
Fee-only planners will proudly state that they take听a fee, the amount of which is disclosed upfront, and that they receive no other compensation for any advice they give you 鈥斕齨o commissions, referral fees, kickbacks or any other hidden fees. Other planners won鈥檛 be able to. It鈥檚 that simple.
How to find a fee-only planner
The first step is to ask friends and family whether they have a financial planner they trust. If they like their financial planner, odds are that you will too. If no one you know has a financial planner, ask your accountant or lawyer or another trusted professional for recommendations.
Also check out听the听听(NAPFA). Its website has a 鈥淔ind an Advisor鈥� search tool that can provide a listing of fee-only financial advisors in your area. One thing to keep in mind, particularly if you live in a remote area, is that many advisors provide virtual appointments online.
The bottom line
Good financial advice is expensive. But it鈥檚 not nearly as expensive as no financial advice, or even worse, bad advice. Make sure you hire a financial planner who is duty-bound to prioritize your financial interests above his or her own.
This article first appears at
