Tips on Picking a Financial Planner – It Is Your Money and No One Cares More About It Than You

by Hank

I enjoy managing my own investments .  I like picking my own stocks and mutual funds, but I know that that is not the same for everyone.  And, that is okay.  Some people have such complicated financial lives and situations that some times you need help.  Lets face it, you cannot get all of your financial advice from blogs, books, and radio talk shows.  Sometimes you should seek the advice of a certified financial planner.

But, how do you pick one?  Here are some tips…

  1. Heart of a Teacher.  My favorite personal finance radio host, Dave Ramsey, says that this is an important attribute.  You cannot just give complete control of your finances to a financial planner like most sports stars do.  You should not just turn over your investments to a financial planner.  You have to know what your planner is doing with your money and why.  It is your money.  Financial planners should teach you, show you all of your options, and let you pick where you want to invest your money.
  2. Licensed.  Insurance agents and stockbrokers have to be licensed in order to sell you these financial instruments.  Ninety percent of all complaints that are filed against financial salesmen because of scams involve salesmen who are not licensed.  You can find out if your agent is licensed by checking their records at the Financial Industry Regulation Authority or North American Securities Administrators Association websites.  By checking your agent’s credentials, you can save yourself a huge headache and mitigate a majority of the risk.
  3. Certifications.  The best financial planners are certified.  Certified financial planner are identified with the initials CFP after their names much like a physician uses MD.  CFPs go through a rigorous 10-hour examination, then promise to adhere to a code of ethics, and must also meet continuing education requirements to say current in their chosen profession.  You can check to see if our financial planner has the CFP designation at CFP.net
  4. Salesmen & Compensation.  Remember that most financial planners are salesmen to a certain degree.  Everyone has to make a living some how.  You need to know how your broker, advisor, or insurance salesman is paid.  Do not hesitate to ask them.  I know that you may be uncomfortable coming out and asking, but you need to.  They expect you to ask.  It is your money.  You must be the one looking after it the most.  Some planners are paid up front through the commissions earned by selling you products that they recommend. These arrangements could lead to conflicts of interest that could steer the planner’s advice toward more lucrative products despite their needlessness for your personal situation. You want to look for a financial planner who charges an hourly or annual fee.
  5. References & Interview.  I have walked into a tattoo parlor to get a new tattoo, and the tattoo artist only had one or two small tattoos visible on his arms.  I immediately walked out of the door and found a new place to get the work done.  A good tattoo artist should love his trade and have a lot of tattoos.  I like to see artists with entire sleeves of tattoos on his arms and even tattoos on his neck.  You should look for a CFP the same way.  Your advisor should be passionate about personal finance.  Your financial planner should be good with money.  When you interview your stockbroker before you invest with him, you should ask questions about his ability to manage his own personal finances.  Do you want to take advice from someone up to his eyeballs in debt?  Ask your friends who they recommend.  Picking a financial planner out of the phonebook might not be the best idea.

Remember, no matter what you decide, it is your money.  No one cares more about your money and your financial future than you do.  Take a vested interest in what is happening with your savings and investment.  Do not just blindly turn over your money to someone you just met.  Use the age old military axiom, “Trust, but verify”.

{ 4 comments… read them below or add one }

Debt Relief October 2, 2008 at 1:26 pm

I appreciate your taking the time to write this. I gave it my 17 year old daughter who is a senior in high school study economic, and she loved it. Keep up the great posts!

Jerry October 3, 2008 at 12:06 pm

The first point is a great one and often overlooked. There are plenty of FPs who are unwilling (or, even scarier, unable) to teach clients about where their money is going and allow them to make an informed choice. Going with an FO like that will rarely lead to success, or a good relationship. I prefer the insurance of having someone who has that “heart of a teacher,” as that will allow for a better and more successful relationship over time. Great points!
Jerry

Tim October 3, 2008 at 4:06 pm

A quick correction on the address of CFP Board’s Web site, where you can check to see if a planner holds CFP certification:

You can check to see if our financial planner has the CFP designation at CFP.net.

Hank October 4, 2008 at 2:51 am

Tim,

You are absolutely right. Thank you for the help. I’ve fixed the typo now.

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