Choosing a Financial Planner
"Remember the good old days, when we were in a bull market for stocks? We didn't need financial planners to handle our money during those halcyon days. Why? We were all financial geniuses. Everything we touched turned to gold, especially all of those Internet stocks with wacky names and even wackier business plans. We were all using words like 'synergy' and 'first-mover advantage.' It was awesome," said humorist Andy Borowitz when asked by THAT MONEY SHOW to talk about selecting a great financial advisor.
Borowitz continues, "Well, the good old days are long gone, and now we're not so sure if we're geniuses after all. In fact, now we think it might be a good idea to have a financial planner in our lives. Choosing the right financial planner is the most important decision you will ever make in your life. ... If you get stuck with the wrong financial planner, you could lose everything."
With that warning in mind, THAT MONEY SHOW invited WORTH magazine's editor-in-chief, John Koten, to share some tips. You can hear Koten's advice by playing the video clip at right. Remember, you will need the RealPlayer to watch the video.
The following tips on choosing a good financial planner -- excerpted from Koten's remarks, and enhanced with Web resources -- are just a starting point for you. Make sure to do some research of your own, take control, and be responsible for your finances.
1. In order to focus your search for a financial planner, you should first examine your financial goals and needs. A financial planner could help you with a variety of things, including insurance policy analysis, estate planning, investment advice, and college tuition financing.
2. Familiarize yourself with financial planning strategies and terminology by reading personal finance publications. Here are a few to get you started: WORTH, MONEY, SMARTMONEY, KIPLINGER'S PERSONAL FINANCE, etc.
3. Ask around. Get referrals from friends, business associates, professional organizations, and advisors. You might also try searching a database such as DALBAR to find a financial planner that matches your goals.
4. Interview several planners: You should ask questions about their education, experience, the size and duration of their practice, and how often they communicate with clients. Make sure the planner has the certification that indicates he or she is ethical and has met standards of financial planning competency. You must feel comfortable discussing your finances with the planner you select.
5. Before you choose a planner, verify his or her background by calling the securities or insurance departments in your state about each planner's complaint record. You could also call the CFP Board toll-free at 888-CFP-MARK to determine if the CFP Board has ever disciplined a planner.
6. Once you choose a planner, ask for a registration or disclosure statement (such as a Form ADV). This should detail the planner's compensation method, conflicts of interest, business affiliations, and qualifications.
7. Get all contracts in writing. You should request a written contract that documents the nature and scope of services the planner will provide. This should also include whether the planner's compensation will be fee or commission-based, or a combination of both.
8. Stay in touch. On a regular basis, you should contact your financial planner to ensure that he or she understands your goals and needs, especially as they develop and change over time.
For more information on how you can achieve your financial goals, visit our archive.
