How to select a financial planner

November 4th, 2011 Ron Haines

Working with a financial planner can be a helpful step in securing your financial future.

This is especially true because the financial world can quickly become overwhelming – especially for individuals who don’t work in the financial sector and aren’t familiar with some of the complexities. Why not take the help from someone who has the expertise needed to tackle those challenges?

We’ve put together a checklist of important things you should consider before selecting the financial planner that’s right for you:

Determine your financial goals

Before you meet with a potential financial planner it’s important to determine what your financial goals are. Are you trying to find the best life insurance for you and your family? Are you saving for a new home? Do you want to take your dream vacation? Identifying your specific goals will help your financial planner better help you.

Ask your friends and family

Use your networks of friends, family and acquaintances to get suggestions on who they recommend for financial planners. Have they had good experiences with certain individuals?

Do your homework

Another important step in finding the right financial planner is to ensure they are properly licensed. Do they have the advisor designation? Are they recognized as a CERTIFIED FINANCIAL PLANNER™ professional or CFP® practitioner, a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC). Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. It’s also a good idea to determine what steps the planner takes to stay current with changes and developments in the financial planning field.

Ask about their “typical” clients

When you meet with a potential financial advisor ask them about the “average” client they work with. Do they tend to work with higher incomes? Or do they have clients with more of an average income? This will give you a good idea of who you are working with. Needs vary based on income, so you will want to make sure they work with individuals who are in the same income-range as you are.

Consider how the planner will be paid

There are many different ways financial planners can get paid. Some earn commissions, others are fee-based, and others charge an hourly rate. There are advantages and disadvantages to all three.

A planner who earns money based on commission rather than a flat, hourly rate may have less altruistic incentives for certain recommendations. On the other hand, advisors who are earning a certain percentage of your annual assets might be less inclined to recommend you liquidate your investments or buy a new home, even if that might be the right move for you at that time. Hourly planners are best when your needs are fairly simple. Typically, hourly planners are just starting to build their practice.

Ask the tough questions

Take the time to interview the planner before you begin working together. Here are some questions I recommend:

  • Are you a financial planner on the side, or is this your full-time career?
  • Does anyone beside me benefit from the recommendations you make?
  • What is your background? How long have you been doing this?
  • What is your approach to financial planning?

Make sure they look at the big picture

Financial planners should pull together all of your financial information so they can put the best plan in place for your unique situation. If they just look at one element – like an inheritance – you’re not getting as much value out of their service as you should be. Make sure they look at the aggregate financial picture – from assets to obligations and long and short-term goals.

Ron Haines

About the author

Ron Haines is Market President at MidWestOne Bank. He works in the retail department, specializing in checking and savings accounts, consumer loans, auto loans and home equity loans.

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