Choosing a financial planner can feel overwhelming if you’re not sure where to start.
There are a lot of professionals out there, and it’s not always easy to narrow down your options to the one advisor who’s right for you.
You want to ensure you understand a few basic things about any advisor you speak with – and you want to make sure they understand your money goals and problems so they can help you develop a financial plan for them both.
To choose the best financial planner for you, consider asking the following questions to any professional you consider working with:
Is the Financial Planner a Fiduciary?
One of the most important questions you can ask your potential financial advisor is if they are a fiduciary.
A fiduciary is a professional in a particular field who has expert knowledge of an industry – and who promises to work in their clients’ best interests at all times.
All advisors should work with your best interests in mind, but not all will sign a fiduciary oath on your behalf. If your planner is not a fiduciary, for example, they could be a broker with primary allegiance to their employer – not to what’s best for their clients.
In this scenario, you run the risk of your advisor focusing on someone else’s bottom line, sales quotas, and boosting profits instead of focusing on providing the absolute best financial plan for your unique situation and guiding you to the decisions that will help you reach your financial goals.
Always ask if a financial planner is a fiduciary to ensure they’ll be working in your best interest, not anyone else’s.
How is the Financial Planner Compensated?
When many people think of financial professionals, they assume all advisors are compensated via earned commissions on investment vehicles or financial products.
This model presents a big conflict of interest: will the advisor recommend a certain investment because it’s right for you, or because they’re receiving a commission from it?
It’s important to ask how a financial planner is compensated, because more and more advisors are working under a fee-only model.
This means they charge a flat rate and emphasize actual financial planning services instead of pushing unnecessary investment vehicles and products.
Ask your potential financial planner how they are compensated: are they fee-based (meaning they may charge fees and receive commissions for recommending certain investments) or are they fee-only (meaning the earn money for their services, and do not receive commissions)?
What Are the Advisor’s Qualifications?
Currently, there are no regulations for the terms “financial planner” or “financial advisor.” Anyone can call themselves “financial planners” without having to prove any financial qualifications.
While your potential financial planner may advertise years of experience in the financial sector, it doesn’t signify that she or he has received formal training in financial planning.
Ask if your potential financial planner is a Certified Financial Planner®. The CFP® designation ensures your financial planner has completed rigorous training and a certain number of years of practical experience.
In addition, a CFP® must complete continuing education, training, and stay up-to-date with current trends in the financial planning industry.
What Services Do They Provide?
Every financial planner provides different services and specializes in different areas. Beyond investment consultations, ask what other services a potential financial planner offers.
Some financial planners specialize in transitioning people from the workforce into retirement and offer services to streamline that transition. Others focus on younger clients who are focused on planning for buying a house or starting their family.
In addition, consider if your financial planner is more focused on selling products to you versus providing you services. Your financial planner needs to understand your goals and what your needs are, and provide services according to those needs.
There is no right answer to this question, but think about your long-term goals and see if your financial planner aligns with what you want to achieve.
Who is the Financial Planner’s Typical Client?
It’s important to determine what type of client your potential financial planner has. If you’re a small account in a sea of large, wealthy clients, you may be overlooked by your financial planner.
Not to mention, if your financial planner isn’t used to working with investment accounts of your size, you may be encouraged to choose investment vehicles that aren’t right for you.
Again, it’s very important to find the right financial planner for you and your goals.
For example, if you’re looking to buy a house in the next 10 years, you might want to look for a planner who understands what it’s like to be a young professional looking to hit big life milestones.
Or if you’re looking to start a family (or have a young family), consider a financial planner who is knowledgeable in college savings accounts and the best way to invest in them.
Don’t forget to consider the medium in which you like to receive information. If you like working virtually, choose an advisor who understands technology and can send emails instead of always calling, set up virtual meetings, and provide paperless document sharing.
Choosing a Financial Advisor
Before interviewing potential advisors, determine what immediate and long-term goals are important to you and write them down. Do the same with any financial issues you need help in overcoming.
Keep these in mind when speaking with financial professionals. Do they have other clients with similar goals and problems? Do they understand your needs and wants? Can they relate to where you are in your professional and financial life – and where you want to go?
If you’re trying to choose between advisors, go with the one who you feel most comfortable with and who communicates with you in the medium you prefer. You will be working with your financial advisor closely, so you will want to choose someone who understands you and makes the process enjoyable.
By reviewing the above questions and sharing your goals, you should get a better understanding of what motivates your planner and if you are a good fit together.
Are you interested in having a conversation? We’d love to connect! Click here to request a free consultation. We look forward to hearing from you.
Looking to create your own financial plan? Click here to download our free guide to getting started.