海角大神

Welcome to the latest installment in my 鈥渦ltimate guide鈥� series, where I attempt to lay out all of the things you need to know and consider when making a purchasing decision or a personal finance move. You can check out聽the 鈥淯ltimate Guide鈥� archives聽for a full selection of these guides.

Today, we鈥檙e taking a look at selecting a financial planner. Hiring the right financial planner can be a very daunting task, with a sea of titles and acronyms out there and many advisors clouding the water with clever marketing. Not only that, financial advice is some of the most crucial advice that we receive, as it is often crucial to the planning of our future.

How do we know if we鈥檙e hiring a good one? One can never be聽sure, but here鈥檚 how you can navigate the waters and figure out if you need an advisor and, if so, how to find one that鈥檚 right for you.

Advisor? Or planner?聽Let鈥檚 settle this issue right off the bat. First, anyone can call themselves a 鈥渇inancial planner鈥� or a 鈥渇inancial advisor.鈥� Those terms are generic and can be used by anyone who wants to.聽

Generally, the term 鈥渇inancial planner鈥� refers to someone who helps you set up a financial plan of some kind 鈥� a method for solving whatever financial problem you have 鈥� and a 鈥渇inancial advisor鈥� is a person who helps you implement that plan by choosing specific investments and insurance. Financial advisor tends to be a broad term that includes investment advisors, insurance salesmen, and other such financial professionals.

However, due to the fact that many personal finance professionals use the generic versions of these terms to describe themselves, it鈥檚 really hard for people just seeking answers to their financial questions to get any real meaning out of those terms.

For the rest of this article, I am going to use the term 鈥渇inancial planner鈥� to refer to both groups of people. This is because there is so much overlap between the positions and because, for the most part, people will seek out specific financial advisors to answer specific questions once they reach that point, but they鈥檒l often start with financial planners unless they鈥檙e sure of the specific product they need.

贬辞飞别惫别谤,听virtually every piece of advice in this article works for financial planners as well as virtually any specific type of financial advisor you may need.

Why Get a Planner At All?
This is the first question and it鈥檚 a vital one. Why do we need a financial planner at all?

骋别苍别谤补濒濒测,听I鈥檓 a huge advocate of figuring out financial problems for yourself.聽Nothing beats self-education. If you can learn about a specific problem in your life and can come up with a solution on your own, then you鈥檙e doing great. You are the only person that has聽you聽as the primary person that matters.

Even if you can鈥檛 figure out an answer to your question, the more knowledge you have before you walk in the door, the better you鈥檒l be at figuring out which planners are actually in your corner and which ones are simply selling you products without taking your interests to heart.

厂辞,听the first step in this process is always learning.聽My suggestion is to hit the library and check out some books on the topic that you鈥檙e concerned about, whether it鈥檚 retirement planning or setting up a trust or whatever else it might be.

For things like frugality and setting up a basic budget, you do聽not聽need a financial planner.聽A financial planner starts to become useful when you have money in the bank and you need to make decisions regarding that money. If you do not have substantial amounts in the bank (or are looking at inheriting such money shortly), you don鈥檛 have a need for a financial planner.

When do you need a planner?聽You only need a financial planner when you鈥檙e facing financial decisions regarding your assets that you do not feel comfortable resolving on your own.

As I stated earlier, many issues along these lines are solved simply through self-education, so that should always be the first step in the journey toward a financial planner.

Screening Planners
Once you鈥檝e learned more about the issues surrounding your situation and you realize that you still feel more comfortable hiring an expert to walk you through it, the next step is to screen planners.

What do I mean by 鈥渟creening鈥� them? In your area, there will be a lot of people out there advertising themselves as financial planners. You鈥檙e not going to want to actually interview all of them. Instead, you鈥檙e going to want to whittle that list down to a small number first, and you鈥檙e not going to want to do that by simply sticking your finger in the phone book and dialing the number you鈥檙e pointing at on the 鈥渇inancial planner鈥� page.

The first step, of course, is to get a list of financial planners in your area. My suggestion for that is to start by using the聽search tool at CFP.net.

I鈥檇 use this listing because the people listed there have put in the effort to become certified financial planners through the CFP Board. While this doesn鈥檛 weed out all of the potential lemons, it does weed out those who aren鈥檛 putting in the footwork to get certifications in their field. The CFP certification is about as close to a 鈥渟tandard鈥� certification as there is in the field, so it鈥檚 a good place to start.

There are a few steps I would go through to quickly whittle down this list.

贵颈谤蝉迟,听I would look for planners who are marked as 鈥渇ee-only.鈥�聽As I鈥檝e discussed before,聽financial planners who work on commission have the desire to earn a good commission as part of their motivation. Planners who work via fee only are not looking for commissions 鈥� their only interest is in helping you. You pay them a fee for advice and that鈥檚 the only way they earn money from you.

The next step I鈥檇 take is to聽ask your social network for suggestions and cross-check those suggestions with this list.聽I would personally approach people you know who may have used financial planners in the past and ask for their recommendation. Who did they use? Did that person do a good job?

The people you鈥檒l be left with are fee-only financial planners who have enough initiative to get certificationand聽have a positive recommendation from your social network. That鈥檚 a pretty good list to start from, plus it鈥檚 likely a short one.

Those are the ones I鈥檇 move on to interviewing.

Interviewing Planners
I would never hire a financial planner without a face-to-face meeting first. A face-to-face meeting can tell you a great deal about a financial planner, even if you鈥檙e far from an expert on the issues you want to talk about.

I speak from experience here. Several years ago, my wife and I聽met disastrously with a financial advisor. He was ill-prepared, highly disorganized, and seemed far more focused on selling us things we didn鈥檛 want than listening to our situation. That meeting moved us from being confident in his work to moving our business elsewhere.

A while back, I wrote an article on聽five questions you should ask any financial advisor聽and most of them still hold true here, though your filtering process should have effectively answered two of them. The other three I would always ask are:

What areas do you specialize in?
You want to know what that planner鈥檚 specialties are. Are they an expert in estate planning? Are they an expert in helping people get investments sorted out? Are they an expert in insurance and protection of assets?

You鈥檒l want to ask this before giving much information about your own situation. That way, the person can鈥檛 give an answer that鈥檚 swayed by what they already know about you.

What are your potential conflicts of interest?
Every financial professional has聽some聽conflict of interest. If someone tells you they don鈥檛 have any, then you should be very wary.

A good financial planner will tell you about their conflicts very directly and clearly. They should also be able to explain how they mitigate those conflicts so that they have minimal impact on you as a customer.

What sets your advice and suggestions apart from alternatives?
This is a good question to ask once they鈥檝e begun to outline a plan for you. They should be able to compare and contrast what they鈥檙e telling you with other options and explain why this one is the best for your situation. Their answer should tie聽directly聽into your situation.

A final note:聽when you reflect on the interview, you should not feel as though the planner did most of the talking.聽The conversation should be close to 50/50 and, if anything, you should have talked more. The planner should have been asking you lots of questions in an effort to understand your situation as clearly as possible before offering any advice at all.

狈辞飞,听most planners will offer a low-cost or free initial meeting, which is where you should be able to run through these things and get a feel for the person.

After interviewing all of the potential candidates, one will likely emerge head and shoulders above the others for you 鈥� and that should be the one that you hire!

Good luck!

The post聽The Ultimate Guide to Selecting a Financial Planner聽appeared first on聽The Simple Dollar.