A Financial Planner is someone who can help you see where you can cut back on spending, where you can increase savings, and where you can improve your overall financial health. Obviously, if you are getting to the down and dirty of your financial lives, you want someone you can trust. Someone who is going to steer you in the right direction.
Step one may be to ask people you know for recommendations. You may get a couple. Don't forget to consider the whole picture around the recommendation. In other words, if the person/family member recommending a financial planner seems to have their finances in order, you may give more weight to that recommendation than to someone whose finances appear to be in disarray. Probably, you don't see the whole picture. However, most of us do have an idea of what our family and friend's financial health is.
Don't be afraid to interview more than one prospective planner. Various planners target different markets. Some may have a more narrow practice than others. If you only want one to help you focus on one area, make sure you don't get a planner who only focuses on another area. Ask questions. Be specific about what you are looking for.
A good planner is only as good as the information he has to work with. If he's not asking you very detailed questions, he may not have enough information to give you the best answer. Like a doctor, they need all the information in order to give you the best treatment. Don't hide financial information from your planner!
Calling yourself a financial planner doesn't necessarily require any additional training. Certified Financial Planners (CFPs) and Personal Financial Specialists (PFSs) have special training and exams they must pass to get those designations. In addition, they are monitored by the group who awards such designations. That doesn't mean that someone without the extra designations is a fraud, they probably aren't. It just means that you may want to do some extra checking into their background. If you have a more complicated financial picture, you probably should consider someone with the training to match.
There are three ways that a financial planner will get paid. Fee-only, Fee-based, and Commission.
- Fee-only means you will pay a flat rate per year or per visit or per hour etc.
- Commission means the planner will get paid based on what products he/she sells you.
- Fee-based is a combination of Fee-only and Commission.
Don't be shy about asking how your chosen planner will get paid.
Watch out for planners who push certain "brands" of products exclusively. They may be more tied to that particular company and probably won't search for the product that really is in your best interest.
Above all, make sure you're comfortable with your planner. Personality does count. That doesn't mean that when your planner sternly tells you that you need to stop spending more than you make you should ditch them immediately. It does mean that your planner should take the time to teach you why you should consider a certain product. Don't let a planner push you into something you're uncomfortable with.
If you've chosen to use a financial planner, it probably pays to follow their advice. Otherwise, you've paid for no reason. So don't waste your money if you aren't going to work with them to improve your financial situation.
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