How to Hire a Financial Planner
A skilled and trustworthy financial planner can provide you with accurate and objective financial advice that is tailored to your unique goals and financial situation. A well-qualified and capable planner will have a deep understanding of financial concepts and, more importantly, how those concepts apply to you, your financial goals, and your life. Choosing the right financial planner is a major decision. So how do you find the right one?
Searching for a Financial Planner
An essential starting place is to begin by searching for a fee-only, fiduciary financial planner. A fee-only fiduciary is legally bound to act in the best interests of their clients. They are paid only by their clients and do not receive any commissions or kickbacks from the sale of financial products - such as annuities, insurance, mutual funds, or loans. Selecting this type of financial planner is valuable because they are less likely to be influenced by outside interests. A fee-only planner has fewer conflicts of interest and, as a result, is more likely to provide unbiased and objective financial advice.
When searching for a fee-only, fiduciary financial planner, resources such as the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network can be quite helpful. These organizations provide lists of financial planners who adhere to fee-only, fiduciary principles. In addition to using these resources, you should also check for certifications such as the Certified Financial Planner (CFP®) or Personal Financial Specialist (PFS). These certifications indicate that the financial planner has met certain educational, professional, and ethical standards.
When researching potential financial planners, it's also important to identify the types of services you are seeking and planners with clients that have similar needs to yours. After all, you wouldn't go to an optometrist for dental work! This step will help ensure that you find a planner who is well-suited to your specific financial planning needs and objectives. Additionally, you should look for a planner with a sophisticated understanding of taxes and tax planning. Ideally, the financial planner should have specialized training and/or a credential displaying their competency in this all-to-important area. Every financial decision is also a tax decision, and choosing a planner that can help you with tax planning is paramount.
Narrowing Down the Options
Once you have compiled a list of potential financial planners, the next step is to narrow down your options. One way to accomplish this is by determining what services you need and focusing on planners that specialize in those areas. You should also consider the planner's fee structure and make certain their approach aligns with your needs.
When considering the experience of a financial planner, it's important to look at both the number of years they have been in practice and the types of clients with whom they work. A financial planner who has been in practice for many years may have a wealth of knowledge and expertise, but may not possess unique knowledge about your situation. On the other hand, a financial planner who is newer to the industry may have a fresh perspective and be more open to innovative strategies, but may not have as much experience to draw upon.
A person or couple evaluating a planner should also consider communication style and make certain the planner's approach is a good fit for you. It's important to choose a person that you feel comfortable communicating with and one that is able to clearly articulate financial topics in a way that resonates with you personally. Similarly, based on your preference, choosing a planner who is willing to work in either a digital or in-person setting can be highly valuable. And finally, establishing expectations for how quickly you can expect to receive a response to your messages or calls, your and the planner's preferred method of communication (e.g., phone, Zoom, text, email), and how frequently you'll have direct, real-time meetings are all essential factors to ask about to ensure you're happy with the experience.
Meeting with Potential Planners
Once you have narrowed down your options, it's time to meet with potential planners. I typically suggest that folks schedule consultations with at least three different planners to get a sense of their approach and to determine with whom they feel comfortable working. When meeting with the planners, be sure to come prepared with a list of questions to ask. These might include questions about their qualifications, experience, and fee structure. You should also discuss your financial goals and objectives to see if the planner is a good fit for your needs.
In addition to discussing financial topics, you should also assess the personal qualities of the planner. Some qualities to look for include honesty and integrity, professionalism, good communication skills, empathy, and adaptability. You should also ask what sources the planner draws on or follows to obtain their information, as this will give you an idea of the types of resources they use to stay up-to-date on constantly changing financial matters.
Though the internet has plenty of lists on questions to ask financial planners during the interview process, I’ll provide eight less-often considered examples.
Do you own your own practice, or do you work for someone else?
How is my situation similar or different than your typical client?
Can you provide examples of strategies you have created for clients with similar financial goals and needs as me?
How are you compensated, and how do you handle conflicts of interest when they arise?
What education do you invest in to stay on the cutting edge of financial topics?
How do you communicate with clients, and how often will we meet?
How do you handle unexpected events or changes in a client's financial situation?
Will you collaborate with my other advisors such as accountants or attorneys?
Conclusion
Remember to take your time when making this major decision, and consider telling the planner that you will be waiting a certain amount of time before making a choice. This will give you time to fully consider your options and make an informed selection in a deliberate fashion. Working with a financial planner can be an invaluable resource in achieving your financial goals, but it all begins with choosing the right one for you. Wishing you the best of luck in your search!