Summary

Buying a new home, planning for retirement or your children's education, or just getting your finances in order can be a difficult task for many individuals or families. Whatever your circumstances, working with a financial planner can be a useful step in securing your financial future. There are several questions you can ask to effectively interview and evaluate financial planners to find the one that's right for you. You want to select a competent, qualified professional with whom you feel comfortable—one whose business style suits your particular financial planning needs.

Financial planning is the process of meeting your life goals through the proper management of your finances. Life goals include buying a home, saving for your child's education, or planning for retirement. The financial planning process involves gathering relevant financial information, setting goals, examining your current financial status, and devising a strategy for meeting your goals.

Introduction

Some personal finance magazines, software packages, and self-help books can aid you in doing your own financial planning. However, you may decide to seek assistance from a professional financial planner if you aren't knowledgeable in certain areas of your finances or you have encountered an immediate need or major life event such as a birth, inheritance, or serious illness. A professional financial adviser can also help you improve how you currently manage your finances, particularly if you are unsure of where to start.

Implementing Your Financial Plan

In addition to being qualified to provide you with general financial planning services, many financial planners are also registered as investment advisers or hold insurance or securities licenses that allow them to buy or sell products. Other financial planners may direct you to more specialized financial advisers to help you implement your plan. Similarly, these specialists should refer you to a general financial planner if they cannot meet all your financial planning needs. 10 Questions to Ask When Choosing a Financial Planner

The questions below can help you to effectively interview and evaluate financial planners to find the one that's right for you. You want to select a competent, qualified professional with whom you feel comfortable--one whose business style suits your particular financial planning needs.

• What experience do you have? Find out how long the financial planner has been practicing and the number and types of companies with which he/she has been associated. Ask the planner to describe past work experience and how it relates to his/her current financial planning practice. Choose a financial planner who has at least three years' experience providing financial planning services.
• What are your qualifications? Ask the planner what qualifies him/her to offer financial planning advice and whether he/she holds a financial planning designation. Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning, and retirement planning. Ask how the planner stays current with changes and developments in the financial planning field.
• What services do you offer? The services offered by a financial planner depend on a number of factors including credentials, licenses, and areas of expertise. Financial planners must be licensed to sell insurance or securities products and be registered with certain state or Federal agencies to give investment advice. Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may specialize in a particular area such as estate planning or taxes.
• What is your approach to financial planning? Ask the financial planner about the types of clients with whom he/she has worked and the financial situations with which he/she is familiar. Some planners prefer to develop one plan that takes into account all of your financial goals. Others provide advice on specific areas, as needed. Make sure the planner's viewpoint on investing is not too cautious or overly aggressive for you. Find out if the planner will implement the financial recommendations developed for you or refer you to other financial professionals or specialists.
• Will you be the only person working with me? The financial planner may work alone with you or rely on others in the practice to assist. You may want to meet everyone who will be working with you. If the planner works with professionals outside his/her own practice to develop or carry out financial planning recommendations, get their names and check on their backgrounds as well.
• How will I pay for your services? As part of your financial planning agreement, the financial planner should clearly state in writing how he/she will be paid for the services to be provided. Planners can be paid in several ways:
  • A salary paid by the company for which the planner works.
  • The planner's employer receives payment from you or others, either in fees or commissions, and pays the planner's salary from those earnings.
  • Fees based on an hourly rate, a flat rate, or on a percentage of your assets and/or income.
  • Commission paid by a third party from the products sold to you to carry out the financial planning recommendations.
  • Commissions are usually a percentage of the amount you invest in a product.
  • A combination of fees and commissions.
• How much do you typically charge? While the amount you pay the planner will depend on your particular needs, the financial planner should be able to provide an estimate of charges for the work to be performed. The estimate is based on the planner's hourly rate, flat fee, or commission.
• Will anyone besides me benefit from your recommendations? Some business relationships or partnerships that a planner has could affect his/her professional judgment while working with you, inhibiting the planner from acting in your best interest. Ask the planner to provide a written conflict of interest statement.
• Have you ever been disciplined for any unlawful or unethical actions during your professional career? Several government and professional regulatory organizations such as the National Association of Securities Dealers (NASD), your state insurance and securities departments, and the CFP Board keep records on the disciplinary history of financial planners and advisers. Ask what organizations the planner is regulated by, and contact these groups to conduct a background check. All financial planners who have registered as investment advisers must be able to show you a disclosure form called Form ADV (or the state equivalent).
• Can I have it in writing? Ask the financial planner to provide you with a written agreement that details the services to be provided and his/her fee structure. Keep this document in your files for future reference.

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