How to Choose a Financial Planner (or Financial Advisor)

There’s nothing better than self reliance and personal empowerment when it comes to financial planning. However, if you don’t yet have the confidence in yourself to manage your financial situation, you’re not alone. You also really only have two options:

A. wander aimlessly and hope you come out ahead and are able to meet your life’s goals
B. hire a financial planner

Unfortunately, finding a good financial planner with limited or no conflicts of interest is incredibly difficult to do, and this person may be one of the most important you’ll ever meet. Time and effort is necessary to seek out the right planner. This list of characteristics can serve as a checklist when you’re looking to hire a financial planner.

how to choose a financial planner

1. They Charge an Hourly or a Flat Fee

Planners have four pay structures: hourly, flat fee, commission from products sold, or by % of assets managed. Don’t get into a situation where you are paying a percentage of your managed assets or a commission on products bought to a financial adviser. If they manage your assets, you are prisoner to their long-term strategy, and poor results.

2. They Educate you

A financial planner that withholds information or doesn’t take the time to teach you the basics is not a good one. Your financial planner should want you to know as much as they know so that eventually you can manage your own finances and refer all of your friends to him/her.

3. They are not a Friend, Co-Worker, or Family

Any time you bring emotional bonds into financial decisions it is usually at the sacrifice of results. Avoid the drama, highs, lows, and the potential to damage relationships if your investments go south.

4. They are Patient with their Advice

A financial planner that calls you with urgent hot stock picks does not have your best interests in mind. There should be no sense of urgency when it comes to sound investing that leads to long-term growth.

5. They are a Certified Financial Professional

All legit financial planners should have some sort of highly valued certification. Perhaps they are a Certified Public Account (CPA), Certified Financial Planner (CFP), or a Chartered Financial Consultant (ChFC). Make sure that they show you their credentials and then verify the credentials with the respective organization.

6. They are Up Front About their Strategy

Before you invest any money through a financial professional, they should have no qualms towards telling you exactly how they plan to invest it. Why? Any good financial planner is going to have a relatively passive investment strategy that they believe in and stick to.

7. They Care About more than just your Investments

Sound financial strategy involves a whole lot more than just the types of asset classes you are investing in. A good financial planner is going to invest the time to take a holistic look at your spending habits, debt obligations, life goals, and more.

8. They have a Good Reputation

You’re not always going to be able to find a good referral, but they certainly don’t hurt. Just be wary of a hot shot planner that has had a little short-term success in managing your buddy’s investments, and now they are the greatest investor to come along this side of Omaha.

9. They have Never Been Disciplined by the Authorities

Check with regulating authorities like your state’s insurance and securities dept., FINRA, and the CFP Board to make sure that your financial adviser does not have any black marks against them.

10. They Invoke Genuine Trust

If you are feeling nervous, fearful, or stressed energy when around an adviser, trust your instincts and get the heck out of there. If you don’t trust your financial planner, it’s not going to be a good business relationship, and there are plenty of other advisers out there.

11. They Abide to the Fiduciary Standard

The Department of Labor’s fiduciary rule was abandoned in court, and it would have required financial advisors to act in your best interests. I would ask them to put it in writing that they always use the fiduciary standard.

Final Thoughts on Certified Financial Planners:

By finding your way to this site, hopefully you’re well on the way to getting rid of a financial advisor and becoming your own. If you do decide to go with a professional, take the time and effort to do it right. After all, your entire financial well-being is all that’s at stake, right?

Financial Planner Discussion:

  • Do you work with a financial planner? Why? Why not?
  • How did you get referred to your financial planner?
  • What’s the best/worst financial planner story you have?

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