How to Choose a Financial Planner
By: Source: AARP Bulletin Today Date Posted: 2005-03
Sometimes, your financial questions are bigger than simply wondering which stock or bond to buy next. Those "big questions" can cover a variety of topics, including what your financial goals are, whether you'll have enough money to retire comfortably, or how you can help your children or grandchildren get through college.
A good financial planner can help you answer these big financial questions and plan for a secure future. But first you'll have to do some work to find the planner who is best for you.
What You Should Know
Interview at least three financial planners before you hire anyone. Meet each planner face-to-face to make sure you get along. Find out as much as you can about the individual and the services he or she provides. In addition, make sure you get answers to the following questions:
What are your credentials?
Just because people call themselves financial planners doesn't mean they are qualified to help you make decisions about your money. That's why it's important to check a planner's credentials before you hire him or her. A number of groups train, test, and certify financial planners. For example, a Certified Financial Planner (CFP) must pass an examination, work for a certain number of years, and agree to follow a code of ethics.
Can you give me references?
Be sure to talk to several clients who have worked with the financial planner for at least three years. Ask these clients what they would change about their relationship with the adviser.
What do you charge?
Ask your planner if he or she is willing to give you a written summary of the money you are paying in fees and commissions. Think twice about the planner if he or she isn't willing to provide this report.
What's your specialty?
Your planner should have a working knowledge of many areas of financial planning. These areas should include taxes, insurance, estate planning, retirement planning, investing, and family budgeting. Make sure your planner attends classes to keep up-to-date on tax changes and investment strategies. Ask to see examples of financial plans the planner has developed.
Will you act as my fiduciary?
By law, a "fiduciary" owes the client the utmost care and loyalty. Ask the planner to write a letter on company letterhead explaining whether he or she will be acting as a fiduciary to you. Ask the planner to explain in detail any circumstances when he or she will not be acting as a fiduciary.
What services can I expect?
Financial planners usually prepare written financial plans after analyzing your personal and financial history, your current situation, and your future goals. Find a planner who will give you personalized advice for your situation. Don't settle for a computer printout that could fit any client.
How will we settle disputes?
Ask the planner whether you must agree to go to arbitration in the case of a dispute. In most cases, this means that you give up the right to settle a dispute in court. Your planner should be able to discuss with you the pros and cons of signing such an agreement.
For More Information
Certified Financial Planner (CFP) Board of Standards
The CFP Board of Standards certifies financial planners. You can check the status of a certified financial planner at the CFP Web site. In addition, the Web site features a special consumer section that presents a manual and brochures about choosing a financial planner. On the CFP home page, click either "Check the Status of a CFP Certificant,"or the "Consumers" tab at the top of the page. Also, you can call toll free: 888-237-6275.
URL: http://www.cfp.net
Finding a Financial Planner
Several associations of financial advisers make it easy to find a member in your area. These include:
- The Financial Planning Association (FPA): (800) 282-PLAN; http://www.fpanet.org
- National Association of Personal Financial Advisers (NAPFA): (888) FEE-ONLY; http://www.napfa.org
American Institute of Certified Public Accountants (AICPA)
Check with your state's Board of Public Accountancy to find out if a CPA has an active license to practice in your state. The AICPA provides links to each state's Board of Public Accountancy from its Web site. Select your state from AICPA's map, and then click again on the link to the Board of Public Accountancy. Once you reach your state board's Web site, look for links such as "Search for Licenses" or "License Lookup." Or, call the state board at the telephone number provided.
URL: http://www.aicpa.org
preview