It would be ludicrous to visit a podiatrist if you’re having chest pains. Just as all doctors are not made equal, not all financial advisers are suited for your individual needs.
Say, for instance, you’re a 35-year-old married man with two young children. Your financial circumstance would look quite different from that of a 61-year-old nearing retirement. As a result, you would need different strengths from a financial planner.
Uncovering areas of expertise is just one objective when seeking someone to help manage your finances. At the start of a new year, many people will look for professional help to orchestrate their financial moves. Doing so blindly, however, could potentially leave you in a deeper hole than when you started.
It pays to take precautions, ask the right questions, and identify and stay focused on your goals.
“People tend to get a little too carried away about what miracles the adviser might be able to work for them,” said certified financial planner, Don Whalen of Versailles Financial in Alpharetta. “The adviser’s role is to be a good listener and a prudent steward of that person’s money.”
Before launching forward, take this quick quiz from Kiplinger.com to determine whether you even need a Financial Planner. If your answer is yes, read on. Here’s how to choose one:
1. Get recommendations: As with any major decision, it makes sense to ask those you trust for referrals. Still, not every shoe fits.
“Everyone’s situation is different in terms of the advise they need,” said Scott Winkler, a certified public accountant and certified financial planner in Norcross. “Make sure the individual understands your specific needs and can advise you on those needs. Every planner has different strengths and weaknesses.”
2. Find out qualifications: It doesn’t take much to get a business card that says, Financial Planner. In fact, during the recession, many people have turned to the profession. However, CFPs distinguish themselves because they must have a minimum of three years experience in the field, have passed a rigorous slate of exams to receive certification and are obligated to uphold ethical standards. Only about a quarter of planners have CFP distinction.
A certified public accountant, or CPA, has a financial background, but deals primarily with tax related issues. However, a CPA could also be a personal financial specialist, which means he or she has had additional financial planning education, or a CFP.
Two additional popular qualifications you might see are the CRPC — chartered retirement planning counselor — held by those who specialize in retirement planning, and the ChFC — chartered financial consultant — held primarily by insurance specialists who have studied and practiced financial planning.
3. How is the planner paid: Generally, planners are paid one of three ways — by commission based on the return on your investments; a flat fee or fee-only; or a fee-based payment based on commission and/or a fee.
Keep in mind that many planners are selling certain investments and may be paid based on the products they sell. Fee-only advisers make up a small percentage of planners. All firms in the National Association of Personal Financial Advisors are fee-only. If you have limited assets, you should also find out if the planner has account minimums and if he or she is willing to work with you on specific services rather than comprehensive plans. In this case, you might consider working with someone in the Garrett Network, which could charge an hourly rate.
“A young couple, for instance, may not necessarily need a full-blown estate plan or complex tax planning,” Winkler said.
4. Build trust: Most advisers will allow you a free consultation. That’s your opportunity to ask lots of questions and make sure the adviser is someone you’ll be comfortable with. It is not easy handing over the secrets of your finances. However, the more open and honest you are, the better able your adviser will be to give you the tools you’ll need for financial success.
“Money is a personal thing in your life,” Whalen said. “Who better to talk to about it than someone who does this for a living. We’ve got points of reference. You don’t just want a stock-picker, but someone who takes a comprehensive approach to your finances. There’s nothing wrong with being a money manager, but that’s only part of the puzzle.”