Choosing a Financial Planner
What is Financial Planning?
Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, saving for your child’s education or planning for retirement. It is a process that consists of specific steps that help you take a big-picture look at where you are financially. Using these steps you can work out where you are now, what you may need in the future and what you must do to reach your goals.
This process involves gathering relevant financial information, setting life goals, examining your current financial status, and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.
In the end, Financial Planning should provide direction and meaning to all your financial decisions, like how buying a particular investment product might help you pay off your mortgage faster or delay your retirement. By viewing each financial decision as part of a whole, you can consider its short and long-term effects on your life goals. You can also adapt more easily to life changes and feel more secure that your goals are on track. Once you understand what the process is, it is fairly easy to see how just about anyone can benefit from some level of Financial Planning.
How do I know that I need the advice of a professional Financial Planner?
A good rule of thumb is: when in doubt ask.
You might want to consult a Financial Planner when you are doubtful that you have enough expertise to evaluate the level of risk in your investment portfolio or to adjust your retirement plan to reflect changing family circumstances.
If you have an immediate need or unexpected life even such as birth, inheritance or major illness, you may not know how to make the financial adjustment, what is available to you and how you can cope.
Perhaps you want a second expert opinion about the financial plan you developed or are managing for yourself for peace of mind. Or you know you need to improve your current financial situation, but you don’t know where to start.
Even in the absence of any doubts about your financial planning expertise, you might not feel you have the time to devote to it.
These are all good reasons to consult a Financial Planner.
How is a Financial Planner different from a Financial Advisor?
Financial Planners are individuals who use the financial planning process to help you figure out how to meet your life goals. They can look at all your needs, including budgeting and saving, taxes, investments, insurance, and retirement planning. Or they may work with you on a single financial issue, but with the context of your overall situation.
This approach to your financial goals set Planners apart from all other Financial Advisors, who may have been trained only to focus on a particular area of your financial life.
In addition to being qualified to provide you with general financial planning services, many Financial Planners are also registered as investment advisors or hold insurance licenses that allow them to buy or sell products.
Other planners may have you use more specialized financial advisors to help you implement their recommendations.
Where can I find more information about choosing a Financial Advisor?
For information on Choosing and Advisor you can visit the InvestRight website. This site provides additional information to assist you in determining the Advisor that is right for you. This site will provide you with more information and many helpful tips on the following topics:
- The Advisor-Client Relationship
- Choosing or Changing Your Advisor
- How to look for a Registered Advisor
- How to conduct a background check
- How to conduct a formal interview
- Worksheet for Choosing an Advisor – designed to help people choose a Financial Advisor
- Making Investment Decisions
- The InvestRight Guide to Investing
Ten Tips on Choosing a Financial Planner
- Know what you want. Determine your general financial goals and/or specific needs.
- Be prepared. Read the newspapers and finance publications to maximize your familiarity with financial planning strategies and terminology.
- Talk to others. Get referrals from advisors you trust, from business associates and friends. Alternatively, contact FPSC for a referral to a financial planner in your area.
- Look for competence. A number of specialty designations exist in the financial planning and investment services professions. Choose a financial planning professional, such as a Certified Financial Planner licensee who has met professional standards of financial planning competency and has agreed to abide by a code of ethics.
- Interview more then one planner. Ask them to describe their educational backgrounds, experience, and specialties, the size and duration of their practice, how often they communicate with clients, and whether an assistant handles client matters. Make sure you feel comfortable discussing your finances with the planner you select.
- Check the planner’s background. Depending on his background, call his professional association to check on his complaint record or call FPSC to see if he is a CFP licensee in good standing.
- Ask for references. Find out if the financial planner works with any other professionals such as accountants and lawyers. Request references from these individuals.
- Know what to expect. Ask for a registration or disclosure document detailing method of compensation, conflicts or interest, business affiliations and personal qualifications.
- Get it in writing. Request a written advisory contract or engagement letter to document the nature and scope of services the planner will provide. You should also understand how the planner will be compensated.
- Reassess the relationship regularly. Financial planning relationships are quite often long term. Review your relationship on a regular basis and make sure your planner understands your needs as they change and develop over time.