Overview: How to Find a Financial Planner
Choosing a financial planner is an important step to take toward better managing your money. Financial planners can help you with many aspects of your finances, from building a budget to investing.
No matter where you live, you will likely have many options to choose from when finding a financial planner to help you.
There are many important questions to ask a financial planner before committing to using their services. By making sure you find the best financial planner for your situation, you will feel comfortable and confident that your money is in the right hands.
Here’s how to find a financial planner, and the questions that you should ask them.
“What is your certification?”
This is possibly one of the most important questions to ask a financial planner before making any commitment to their services. This is because their certification is a direct reflection of their education and knowledge of the financial industry, as well as their specific expertise.
Questions to Ask a Financial Planner
When learning how to find a financial planner, it helps to familiarize yourself with these certifications.
There are many different certifications for financial professionals, and each has its own definition. One of the big questions to ask a financial planner is what their exact certification is and what that means for you. Certain certifications will not meet your personal needs. Each certification is complex, but here is a brief overview of each.
A Certified Financial Planner, or CFP, is certified in over 100 topics relating to financial planning. The exam is given by the Certified Financial Planner Board of Standards. These professionals most often work with individuals who need help managing their money.
This is generally the certification you are looking for when you search for a financial planner. If you are wondering how to find a certified financial planner in your area, the CFP Board can help you find one.
Another similar financial planning certification is the Chartered Financial Consultant, or ChFC. This certification is run by the American College and involves a comparable exam to the CFP certification. ChFCs have similar expertise to CFPs.
There are other certifications that relate to more specific aspects of the financial industry. A CFA, or Chartered Financial Analyst, is certified by the CFA Institute in topics such as accounting, portfolio management, and more, and typically works for larger organizations. A Certified Fund Specialist, or CFS, is certified to work with mutual funds, and a Chartered Investment Counselor, or CIC, is certified in investment and portfolio management. These are just a few of the many complex specializations for financial professionals.
When finding a financial planner, you should always look for a professional who meets fiduciary standards. What does this mean? Fiduciary standards are essentially guidelines that ensure that financial planners provide ethical services for their clients. Within these guidelines, there are two main standards: the fiduciary standard and the suitability standard. The fiduciary standard requires financial planners to put their clients’ best interests ahead of their own, while the suitability standard requires that financial planners fit their client’s investments to their needs and experience level. When choosing a financial planner, you should always ask them if they are a fiduciary to protect your own interests.
“What are your rates and payment structures?”
A financial planner will only be useful to you if you can realistically afford their rates. Therefore, one of the first questions to ask a financial planner is what their rates are and how they expect payment. Every financial planner has their own expectations when it comes to compensation, so it is very important to verify this even if you have worked with a financial planner in the past.
There are a few different ways that financial planners receive payment. If you are wondering how to find a financial planner, you can search for a payment structure that fits your needs.
The first option is by salary. These financial planners are paid with a base salary, but they also usually receive bonuses by making sales of certain financial products or services that their company is looking to promote. Some other types of financial planners work on commission, which means that they only get paid from sales of financial products.
Alternatively, many financial planners receive their payment from commission and fees. This means that they charge their customers a fee for their planning services, and they also receive a commission if they sell you any additional financial products. These advisors usually work for large financial organizations.
Some financial planners also work on a fee-only basis. They are usually self-employed, and they only receive payment from service fees, with no commissions. Both of these types of financial planners may be listed as fee-based services, so be sure to clarify this when finding a financial planner.
Fee-based financial planners use a few different payment structures, depending on the company they work for and the services they provide. Two of the most crucial questions to ask a financial planner are what kind of fee structure they use and what their rates are.
The first common fee structure that financial planners use is an hourly one. This is when the planner charges a flat rate for their time. This is perfect if you are looking for someone to help you with just one project, or if your finances are relatively simple to manage. The average cost for an hourly financial planner is anywhere between $150 and $250 per hour, although this can vary depending on experience level.
Some financial planners don’t charge hourly, and instead work for a flat fee for certain services. This may be a good option if you know that the services you need might be time-consuming. You may end up paying less with this fee structure.
If you want a financial planner who manages your money on an ongoing basis, you will likely end up paying a retainer fee instead of an hourly or flat fee. This is when your financial planner charges a fee over time, usually a percentage of the assets that they manage for you. Knowing how these fee structures work and what financial planning services are worth is a big part of how to find a good financial planner.
If you are wondering how to find a financial planner that fits your needs, there are actually many online resources, such as NAPFA and the Garrett Planning Network that can help you search through various types — like just fee-based planners, for example.
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“What services do you offer?”
When learning how to pick a financial planner, you will need to learn the definitions of some basic financial services to determine what you want out of your financial planning service. One of the first questions to ask a financial planner to decide if they are a good fit for you is which services they offer, as well as how they approach them.
Some financial planners take a very comprehensive approach to your money, where they will evaluate everything all at once and decide how to proceed from there. Others will focus on specific financial goals or problems that you may have and tackle them one at a time. You may have a certain approach that you prefer, so be sure to ask before you start your services.
How to Choose a Financial Planner?
Some financial planners will be able to help you with more specific services, such as investing, tax management, and retirement and estate planning. They can recommend specific accounts or services to you that can help you better manage your finances.
When choosing a financial planner, sit down with them and have a chat about what motivated you to seek financial help and what your personal goals for your money are. The financial planner should immediately respond with a basic summary of how they would approach the problem, how they would find you an appropriate solution, and what techniques they would use. If they are very vague or unclear about what services they would offer you, then you should look for someone else. This is something that many people miss when researching how to find a financial planner.
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“What is your track record?”
This is one of the major questions you should ask a financial planner. It is very important to hire a financial planner who has been proven to provide great advice to their clients over and over again. Most good financial planners will be happy to tell you about their experience and even direct you to previous clients who can give you a reference. The length of time your investor has spent in the industry is very important, but so are the results they have achieved for their clients in the past. Sometimes, it is better to go with an advisor with a short but stellar track record, as opposed to a long and mediocre one.
If your financial advisor has experience in investing, then there are actually certain performance standards they can use to show you the quality of their investments. Specifically, the Paladin Performance Standards and Global Investment Performance Standards can be used to calculate track records. Most financial planners who work in investing will be happy to provide you with this information. This is important to keep in mind when finding a financial planner.
Financial planners will need to keep their certifications current to continue working in the industry. Although there are currently no legal regulations governing the practices of financial planners, they won’t be held to the ethical standards of their certifying board unless they keep their certifications current. You can check the status of their certification with either the CFP Board or the ChFC Board. Both of these organizations can provide you with further resources on how to choose a financial planner.
“How do you communicate with clients?”
This may be one of the most crucial questions to ask a financial planner. As the client, you will need to be continuously updated on the status of your finances. You will also need an easy way to get in touch with your financial planner with questions or concerns.
All financial planners will need to have regular meetings with you to go over the status of your finances in person. However, the other methods they use to communicate with you can make a big difference in your level of comfort with them.
Most good financial planners will take your communication preferences into account when working with you. Many people today prefer to talk to their financial planners via email, Skype, or even text message. Some financial planners will be able to meet these technological needs, while others may be less up-to-date with these trends. When deciding how to find a financial planner, you may choose to consider how they communicate with their clients.
Nearly all financial planners will at least be able to communicate via phone. Your financial planner should actively discuss the status of your finances with you regularly. One of the biggest questions to ask a financial planner is how often they will talk with you and how much access to your financial portfolio you will have. A good financial planner will be very transparent and up front with you.
Once you have asked your potential financial planner these important questions, how to choose a certified financial planner is up to you. After evaluating their skills and practices, you will get a good sense for how comfortable they will make you feel and what financial benefits they will be able to offer you.
If you’ve done your homework and feel comfortable with your financial planner, we think you’ll be off to a good start.
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