How to find out whether a planner is a good match
“Financial planners” seem to be around every corner these days. And no wonder. As Baby Boomers retire and Gen-Xers approach middle age, the demand for trustworthy financial advice has never been greater. Yet many people are still in the dark about what a financial planner is, what they do, and how to find one. So, to wrap up this year’s Financial Planning Week, I’ll give you a few pointers on finding a planner.
Basically, a financial planner can help you organize and optimize all aspects of your financial life. This includes everything from getting your budget balanced to saving taxes to helping you set up a long-term retirement savings plan, putting your kids through post-secondary school, and recommending the investments that are best for you.
Can all financial planners do all of this? Certainly, those who have professional credentials such as Certified Financial Planner (CFP) have the skills and training to assist in many of these areas. So when you meet with a potential planner, the Financial Planning Standards Council recommends you ask these 10 questions:
- What are your qualifications? Ask about training and continuing education, designations, and professional credentials. Organizations such as the Financial Planning Standards Council and Chartered Professional Accountants (CPA) grant standing to those who have successfully completed a rigorous program of study and provide a diploma as proof.
- What experience do you have? Ask how long the planner has been practicing, with what firms, and whether the planner has specialized training, such as investment management or financial analysis.
- What services do you offer? Financial planners may offer a variety of services depending on their qualifications, regulatory registrations, and employer (if not an independent planner). For example, some planners can help with setting up a comprehensive plan but may have decided to outsource financial product sales to affiliated firms.
- What’s your approach to financial planning? Some planners offer a comprehensive planning service encompassing a client’s entire financial picture, including setting up a plan and executing an investment portfolio. Others may concentrate only on selling mutual fund or insurance products.
- Do you work with anyone else? Financial planners frequently work with other experts in their organization or at affiliated firms or professional offices, including those you already consult, such as lawyers and accountants. Even the best planners can’t do everything, but they can effectively control your plan and make sure all the parts are integrated for maximum efficiency.
- How will I pay for your services? Your planner should disclose in writing how they’ll be paid for their services. The three most common methods of payment are 1) cost of service, where the planner is compensated by the provider of the product they sell, such as embedded fees in mutual funds, 2) percentage of assets under management, 3) fee-for-service, based on an hourly rate or a menu of services.
- How much do you typically charge? Ask the planner to give you an estimate of costs based on the work they’ll be doing for you. Ask them to break out the estimate in terms of the fee structure shown in question number 6 above.
- Who else benefits from your recommendations? The idea here is to find out if the planner puts anyone else’s interests ahead of you, the client. Those planners holding a CFP designation must annually attest to a code of ethics that clearly states your interests will always come first.
- Are you regulated for any agency or organization? Financial planners who sell products such as securities or insurance must be registered with provincial regulatory agencies. In addition, holders of professional credentials are members of professional bodies that govern their fields and must subscribe to a code of ethics.
- Can I have it in writing? The planner should provide a written agreement of the services to be provided.
© 2014 by Robyn K. Thompson. All rights reserved. Reproduction without permission is prohibited.