With a little self education, and a little bit of time, most people can adequately manage their own financial roadmap. However, you may not have enough time, or you may not want to learn the material you will need to manage your financial life. Your situation may be too complex to handle this on your own. In any case if you have decided to look for a planner, be careful there are plenty of pitfalls to avoid.
Why do I need a planner?
It is important to define what your needs are. If you want a comprehensive plan or just need a portfolio review, different planners may serve your needs better. The point is to match the planner’s experience to the task at hand. Typically a comprehensive plan includes a net worth analysis, a cash flow analysis, insurance review (all kinds of insurance), investment risk analysis, retirement situation analysis and strategies, estate planning and strategies. A plan could also cover business planning strategies too.
Where do you start looking?
The first place to look is Find-A-Planner through the financial planning association. Here is a link. You can also ask people you know and trust for referrals. Ensure the planner you find is qualified, beware some of the designations.
What does the Alphabet Soup of designations mean??
There are many designations in the financial world. One of the most respected in the planning world is the CERTIFIED FINANCIAL PLANNERTM or CFP® designation. This designation requires three years of experience, five courses covering general financial planning, investments, retirement, insurance, taxation, estate. All of these topics are covered in a two day final exam where roughly 50-60% of the people who take it pass.
Other designations include Certified Public Accountant (CPA) – great sources for tax planning. Chartered Financial Consultant (ChFC); these are usually insurance professionals who specialize in financial planning. There are many other designations. If you see one you don’t recognize, research it. Be cautious of ones that have senior in the title such as CSA – Certified Senior Advisor. Many times these are obtained over a weekend class where everyone passes.
Interviewing the planner
Once you have found a few planners that fit your needs, meet with them to discuss your situation. Most of these initial meetings are free. It is important to find a planner that you are comfortable with. The types of questions that the planner asks will help you determine if they are a good fit.
How are they paid??
It is important to understand how a planner is paid. Some are paid off of commissions. Some are paid only fees and some are paid both commissions and fees. Do they sell insurance? Do they charge you for financial planning? There may be many of these professionals that will offer to do your planning for free, but is it really free?
Everyone likes free stuff, but how much do you value the stuff you got for free? I believe you should pay for a plan. A comprehensive financial plan, if done properly, can take many man-hours to complete. It is time consuming for both the planner and the client. If your planner is not charging, where is he making up this cost? If a planner is offering it for free, he may be tailoring the advice given to the products he is trying to sell. Additionally if you pay for it you will take it more seriously.
In summary, finding a competent planner that fits your needs is easy if you follow a few steps. Get some referrals, use Find-A-Planner, interview the ones you
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