Unlike someone who calls himself a CPA or physician, almost anyone can call himself a “financial planner” or a “financial advisor” regardless of their educational background and professional experience. Also, not everyone is impartial in their advice and not everyone always acts in the best interest of their clients.
To ensure that your financial planner is well qualified in personal finance and unbiased in his advice, consider the following five things:
1. Planning credentials: Having a highly regarded credential in financial planning, such as a Certified Financial Planner (CFP) or Personal Financial Specialist (PFS), confirms that the professional you want to work with has acquired the necessary education and experience to perform as a financial planner. The CFP and PFS credentials are awarded only to those individuals who have met the requirements for certification of education and experience in personal finance planning. Additionally, they must pass certification exams and agree to meet standards of practice and continuing education requirements.
2. Subject matter expertise: Financial planners are planning professionals, not necessarily subject matter experts. For example, a financial planner will be trained in tax planning and analysis, but unlike a certified public account (CPA) or an IRS enrolled agent (EA), they may not necessarily be a subject matter expert when it is about tax rules. You may be adept at laying out an investment plan, but unlike a Chartered Financial Analyst (CFA), you may not be an authority on the subject of investing. Work with a financial planner who is also a subject matter expert in those areas of personal finance that are important to achieving your financial goals.
3. Client Specialization: Not all financial planners serve all types of clients. Most specialize in serving only certain types of clients with specific profiles. For example, a personal planner can build on their expertise and personalize their services to serve only those individuals and families who are in certain professions or at a particular stage of life with specific financial goals and net worth. Ask if the planner specializes in serving only certain types of clients with specific profiles to determine if it is the right fit for your situation and financial goals.
4. Fee Structure: The fee structure largely determines which interests it serves best: your client’s or yours. A paid professional only charges fees for their advice, while a paid professional not only charges fees, but also earns commissions, referral fees, and other financial incentives for the products and solutions they recommend. Consequently, the advice of a fee advisor is more likely to be unbiased and in your best interest than the advice of a fee-based financial planner. Work with a professional whose fee structure is conflict-free and aligned to benefit you.
5. Availability: He or she must be available, attentive, and accessible to you on a regular basis. Ask the planner how many clients they currently serve and the maximum number of clients they plan to serve regularly in the future. This client-to-planner ratio is one of the key factors in evaluating the availability of your planner to you in the future. Also, ask what planning activities the planner typically performs and which are delegated to a para-planner or other junior staff. Lastly, make sure the planner is easily accessible by phone and email during normal business hours.
Once you’ve shortlisted a few well-qualified and unbiased financial planners in your local area, check out the ones who offer a FREE initial consultation first. During the initial consultation, evaluate the availability of the planner and any other professional attributes that you are looking for in your financial planner.
Having a well-qualified and unbiased financial planner by your side is extremely important on your way to your financial goals. When looking for one, consider the planner’s professional credentials, client specialization, subject matter expertise, fee structure, and availability to select the right financial planner for your needs.