A financial planner's main responsibility is to assist you and your family understand how to best save earnings, retain value, grow holdings value and meet both short-term and long-term financial goals. Financial planners should provide short- and long-term expectations with the same portfolio, which can be quite an undertaking. The value of the planner is that he or she provides the client an objective opinion of where best to put assets that will have the greatest likelihood of financial goal success.
Understanding the Role of a Financial Planner
Many people get the difference between a financial planner with a stockbroker mixed up, and then they find themselves playing the public market in ways that work against their goals. Further, planners are not public accountants; it is not their job to manage tax filings or track spending.
Since financial planners act as a professional adviser, they are often seen as filling in a gray area between the tax accountant and the brokerage trader. Some financial planners are also bridging the gap between CPAs and traders by offering a variety of different services including, investment management, tax solutions and full-service financial planning. That being said, there are ways that you can guarantee that your financial planner is qualified to do the work needed for proper asset and wealth management. Continue reading as we discuss six different questions you should be asking when hiring a new financial planner.
Question #1: How Long Have You Been Practicing?
One of the easiest and most important questions to ask when considering to hire a new financial planner is how long have you been practicing? While most planners are qualified, finding someone that you trust with your life savings as well as the future of your financial path is extremely important. Everyone needs to get a start somewhere, however it is crucial to find someone with experience. It may be helpful to know that for an advisor to be eligible for a CERTIFIED FINANCIAL PLANNER™ (CFP®) designation, they need to have at least three years of experience.1
Question #2: What Are Your Credentials?
It is also important to know what credentials your financial planner possesses. Choose a financial planner who possesses the appropriate professional qualifications to meet your needs, such as the CFP® credential. In order to become a Certified Financial Planner (CFP®), the planner must pass testing that demonstrates they meet regulated educational requirements and professional standards.
Below are some other credentials you may want to look out for include:
- Chartered Financial Analyst (CFA)
- Personal Financial Specialist (PFS)
- Retirement Management Analyst® (FMA®)
- Retirement Income Certified Professional® (RICP®)
- Certified Retirement Counselor® (CRC®)
Question #3: What Is Your Niche?
There are some financial planners who only choose to work with a niche clientele such as - pre-retirees, doctors, educators, women, etc. On the other hand, some planners are more accommodating to helping everyone who meets some general criteria - regardless of age or profession.Finding a financial planner who works constantly with clients similar to you is a great way to make sure they will understand your specific needs and be familiar with options available to you.
Question #4: Do You Have References?
The CFP® board's website is a good place to start your search for a financial planner. If you are looking for a fee-only planner, the National Association of Personal Financial Advisors (NAPFA) provides a good start to find planners who carry high-level standards and ethical qualifications. Broker Check by FINRA is another helpful resource to review any complaints that may have been filed against the advisor you are considering working with.
Question #5: What Are Your Retirement Planning Projections?
How much money will you be able to spend each year from now through your life expectancy?
This is based on assumptions about:
- The rate of return of your assets
- The pace of inflation
- Your spending habits
You’ll want to work with a planner who is able to help you plan for the long term while also offering realistic expectations of what retirement may look like. Your financial planner should be able to assist you balance your ability to live comfortably today while preparing for a sound retirement.
Question #6: How Are You Compensated?
Transparency is important especially when working with a new financial planner. Make sure your planner explains the fees and services that will be provided clearly. This is important so you have a solid understanding of what you’re expected to pay and the services you will receive. For example, if you are going to be working with a fee-only financial planner, it is important to know they will be incentivized to provide advice and service that is in line with your goals.
When it comes to planning for your future, having a strong and qualified financial planner is a crucial part of this process. Hiring a trustworthy financial planner is something to take seriously. Before hiring a financial planner, make sure you ask yourself these questions as it is an important step towards hiring the right person for you and your family.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.