By Erik Braunitzer and courtesy of Douglas Elliman Real Estate Company, agents for NYC Apartments.
Tips and Considerations When Choosing a Financial Planner
Phrases such as “money cannot buy happiness” are popular; but in reality, money is the key to security, reaching major goals and doing the things one would like to do in life. Choosing a competent and highly qualified financial planner is a great first step toward achieving financial goals like investing for a secure retirement, funding a child’s college education or preparing to buy a home.
Anyone can claim to be a financial planner; and, unfortunately, there are many people out there who are only looking out for their best interest when they advise a person to invest a certain way. It is important to put the time in to check out potential financial planners, verify their credentials and interview them before trusting a financial planner with your money and, essentially, your future.
1. What Are His or Her Qualifications?
When you begin your search for a professional to help manage your investments and plan your financial future; you will probably encounter a variety of professionals with different titles who will claim to be able to help you create the best financial plan. You will want to find out what title and qualifications the planner you are considering holds and do some research on that particular title. A CFP (Certified Financial Planner) is backed by the Certified Financial Planner Board of Standards and has passed a rigorous exam as required of this organization. The titles of CPA-PFS (A Certified Public Accountant- Personal financial Specialist) or ChFC (Chartered Financial Consultant) are also considered reputable.
It is easy to claim the title of financial planner. Be sure the specific title the planner you are considering means something by looking into the organization. What standards must holders of that title meet? Are examinations required? Is continuing education required so that the planner stays up to date on current information?
2. Does He or She Have a Specialty?
Some financial planners specialize in a certain area, or have a large amount of experience in a particular area of financial planning. Some examples include retirement planning or investing to fund an education. if you are seeking financial advice for a specific purpose; you might benefit from choosing a planner with special expertise in that area.
3. How Will You Pay for the Planner’s Services?
The way that the planner is paid is an important consideration. Financial planners can be paid in a variety of ways. The first and, arguably, the most desirable is a fee only financial planner. A fee only planner charges either a pre-determined upfront fee for his or her services, or charges a yearly fee based on a certain percentage of your portfolio. A fee only planner does not receive commissions on any products or investments he or she might suggest; so you can be sure the product is not being offered because of the commission he or she might receive if you invest in it.
Some planners are paid solely through commissions on products and investments or through a combination of fees and commissions. High quality planners who are paid by commission are available; and being paid by commission certainly does not mean a planner isn’t good at their job. You should proceed with caution here, though. It is more difficult in this case to determine if the financial planner truly thinks a recommended investment is right for you when the possibility exists that it is being recommended because of a potential commission. If you choose a financial planner who works on commission, it is very important to work with a planner with a good reputation and a solid record.
4. Consider the Planner’s Style
How cautious or aggressive is this financial planner? What type of planning does he or she specialize in or prefer doing? It is important to choose a planner with a style that will meet your needs help you reach your goals. If you are a cautious investor, for example, an overly aggressive planner is not a good match for you.
Are you the type of client the planner typically works with? For example, if you earn an income of $50,000 per year and the planner typically works with much higher earning individuals; will the planner still be a good match for you? Some planners prefer to manage portfolios with a larger amount of money in them. If you are just starting out, you might want to find someone with more experience working with beginning investors.
5. How Do You Feel During and After the Meeting?
While you are meeting with the financial planner, and following the meeting, pay attention to how you feel about the interaction. Was it easy to talk to this person? Did he or she seem to be listening to what you were saying and asking appropriate questions? In addition to the basics like credentials and experience, it is important to work with a financial planner you are comfortable talking to and who pays attention to your specific needs and goals. If you tell the planner you are looking for safe ways to invest your money to minimize risk and he or she starts talking to you about aggressive stocks that are geared more towards growth; this is a red flag.
6. Check His or Her Background
This can be done in several ways. Try asking for referrals so you can find out about the planner through current or previous clients. For Certified Financial Planners, a record of public disciplinary actions can be found directly on the organization’s website. State insurance and securities departments as well as well as FINRA (Financial Industry Regulatory Authority) also keep records of disciplinary actions against financial planners and brokers.
It is time consuming to interview several financial planners, ask the right questions and conduct research into the planner’s background and credentials; but finding the right planner is well worth the effort. Finding someone who is qualified, ethical and a good fit for you will mean receiving the best advice for your situation and feeling confident that your money is being handled responsibly.