Every once in a while, such as when you receive a subpoena or need to write a will, you will decide you need expert advice — in these cases, from a lawyer. You need that expert advice because you’re not an expert in law.
Similarly, you may turn to an expert if you have a major financial decision to make, such as when to retire or how much life insurance you need. And in many of those cases, you will probably decide you need a professional financial planner. One of the big decisions: Can you afford one?
It’s a good question, and a difficult one to answer — because the cost of a planner depends not just on your individual situation, but also on how the planner gets paid. It’s not unusual for some planners to require assets of $1 million or more before they will see you. And your case may be more expensive because your life has complications, such as a small business to sell or 12 children from four spouses.
Nevertheless, it’s possible to get a financial planner who suits your needs and your savings. “I believe that anyone who is seeking competent and ethical financial advice has the opportunity to find it, if they know where to look,” says James Lee, a certified financial planner in Saratoga Springs, New York, and president-elect of the Financial Planning Association’s board of directors.
Start with the basics
Before you start talking money with a money manager, you need to know what his credentials are, how long he has been in business, and whether he has any criminal or disciplinary history. And fortunately, AARP has a concise checklist of what to look for in a financial adviser and what to avoid. Try AARP Interview an Advisor for free help with understanding the adviser’s credentials, compensation and how to get the conversation started.
The short version: Choose an adviser who is a “fiduciary,” which means she is required to put your interests before hers. If she has a choice of two similar mutual funds, for example, she would be obliged to choose the one with the lowest overall costs to you. Also:
- Check the adviser’s credentials. Registered investment advisers are required to be fiduciaries. Certified financial planners may be fiduciaries, but they don’t have to be. You can get a rundown on the myriad financial planning designations from the Financial Industry Regulatory Authority (FINRA), the investment industry’s self-regulation organization.
- Check for any disciplinary actions against your adviser. The U.S. Securities and Exchange Commission, your state securities regulators and FINRA provide free reports on the disciplinary history of financial advisers.
- Check for the services a planner offers. Some offer tax services, estate planning and insurance as well as overall financial planning. Try to get one who offers all you need.