How Financial Planner can Help you Meet your Goals

Choosing a financial planner can help you meet your financial goals. However, the process is not without pitfalls. Selecting a financial planner is a very personal decision depending upon what you would like to accomplish, but there are broadly applicable criteria as well.

Personal Financial Planning by G. Victor Hallman, Jerry S. Rosenbloom Provides in-depth coverage and analysis of the latest tax law changes. In addition, it features an entirely new chapter on planning and paying for education expenses, including the new 529 plans; ramifications of the GST estate tax repeal; new checklists and questions to tie up each chapter; and more.

The most important thing to remember is that the financial planning industry is unregulated. The majority of planners have not passed any tests to demonstrate their competence. Only about 40,000 of the 250,000 or so planners in the United States are Certified Financial Planners. Chartered Financial Consultants and Personal Financial Specialists, which are certifications offered by the insurance and accounting industries, account for only a small portion of the remaining planners. Selecting a planner with a certification is a critical initial consideration. Finding someone who is also experienced and participates in continuing education is important as well.

In addition to their qualifications, it is important to understand how you will be compensating your financial planner. Many supposed financial planners are really just sales representatives for a particular financial product. Understanding whether your planner subscribes to a code of ethics that includes fiduciary responsibilities can shed light on the degree to which the planner is likely to place your needs ahead of their compensation system.

Two compensation systems are prevalent in the world of financial planning. Most planners get a portion or all of their compensation through commissions on financial products they sell you. These arrangements can create a conflict of interest between you and your planner. Your planner should be forthcoming about how commissions affect their compensation and will influence the products they will recommend to you.

Alternatively, some planners are compensated solely by an annual fee. The fee is typically based on a percentage of your assets under management. One percent per year is typical. Fee-based planners are not subject to the same conflict of interest that exists with commission-based planners. However, you may pay more for their advice than you would by going the commission-based route. They are also more difficult to find.

Another important consideration is the aspects of your financial life that you are seeking advice about. Many financial planners only have adequate knowledge to address a small portion of a client’s financial condition. Those with an insurance background are best at insurance, while those with a brokerage background tend to be better at investing. It is best to find a planner who can understand your entire financial situation and provide comprehensive financial advice. At the very least, try to match your planner’s background with your most important problems or obtain advice from multiple planners with different specialties.

The final consideration is the nature of the firm you would be working with. Larger companies and smaller companies will likely provide different degrees of service and fee structures. Understanding whom you will be working with on an ongoing basis to formulate and implement a financial plan is very important. There is little point in interviewing a famous financial planner if you are ultimately going to be assigned to a staff planner that you have never met to actually create your plan.

By interviewing multiple financial planners before you make a selection, you will best be able to find one you are comfortable with. Personality, qualifications, and compensation structure are all important areas to evaluate. Before making a final selection, check into any disciplinary problems your prospective advisor has had by contacting your state’s insurance department, the National Association of Securities Dealers, the Securities and Exchange Commission, and the group overseeing their planning certification. While not guaranteeing you will not encounter problems, applying this approach will greatly reduce your chances of having an unpleasant experience.

Related Post:

• Modern Creative Financing
• How to Build, Manage & Maintain Wealth