In order to end up with the financial planner best suited to your needs, you have to clearly understand what you are looking for and what options are available to you. This is done by researching in two areas.
Firstly, you research the market to find out what kinds of financial planners are available, familiarizing yourself with their different expertise, styles and price ranges etc. Secondly, you examine your own unique requirements in a financial planner.
Research the market: Financial Planner Essentials
Financial planners can be as different as apples and oranges, especially when it comes to fees. Some planners are fee-only, some take commissions, and some take commissions
and charge consulting fees. You will also find other variations in their credentials, type and length of experience, and areas of interest. As you research financial planners through referrals from friends and colleagues, through business directories, and on the Internet, keep the following essentials in mind:
Fee Structure: A financial planner's fee structure is important to know not just for budget reasons, but also because it gives you a clue as to the type of advice you might be getting. Some planners receive compensation strictly through fees, and do not take commissions on financial products such as mutual fund groups or term-life insurance. Other planners may take a combination of commissions and consulting fee, or may reduce consulting fees if commissions are earned from you. It is important to bear in mind that financial planners who operate on a commission-only basis may be biased about the products they recommend to you.
Certification: Financial planners may not necessarily have to be registered or licensed in your community, so your first step is to understand what your local government requires. Once you know the law, you can easily determine if financial planners are meeting those requirements. Some associations have certification programs, but not all programs are created equal. If a planner includes a certification in his or her credentials, visit the association's website to find out exactly what the certification process entails, how they monitor planner's ethics, and if they provide continuing education.
Education and Experience: Financial planning requires an advanced knowledge of the business and financial world, which can be achieved through education and on-the-job experience. Planners with high-level college degrees may cost more, but you may feel more secure knowing they have received the proper education. Likewise, a good planner is an experienced planner, so you may not want to go with someone who is just starting out.
Special Areas of Interest: Some financial planners are experts in special areas, such as working with the disabled community, single mothers, gay and lesbian couples, or the self-employed. If you are looking for a specific area of expertise, start with a member group or association for that special interest and get referrals from them.
References: Checking references for candidates is absolutely essential when choosing a financial planner. You are entrusting your livelihood, and your financial future with this planner, and you need to make sure his or her previous and current clients are happy with the services they have received. Remember to go beyond the testimonials posted on planner's websites and brochures, and ask for a list of clients you can call or email directly.
Research Your Needs: Questions to Ask Yourself
Now it's time to determine what your requirements are in a financial planner. For example, will you use the financial planner only for superannuation advice?
You can start this process by considering the following questions - as well as any others you think of yourself - and recording your answers.
| Have I used a financial planner before? |
| | If you have used a financial planner, work out what you did or didn't like about the financial planner. You may be looking for one exactly like them, or hoping to find one with different expertise or personality. |
| Do I need help planning for financial goals or dream purchases? |
| | Perhaps you are hoping to purchase a vacation home, go on a trip around the world, or pay for a family member's college education. Maybe you need help planning for semi-retirement, a costly medical procedure, or a career change. |
| What tasks do I want my financial planner to perform for me? |
| | You could be looking to make a specific type of investment based on your values or you might want to invest in “green” companies that are committed to protecting the environment. Perhaps you are looking for investments in women-owned businesses, companies with fair labor practices, or those with ties to specific religious groups. |
| How much time do I want to spend with my financial planner? |
| | You might want to see your financial planner once a year, once a month, or on an as-needed basis. Perhaps you would like to check in with your planner daily, for updates on stock purchases. |
| Do I have any special needs or problems I need my planner to solve? |
| | You may have recently inherited property or a large sum of cash or need to find ways to reduce your income tax burden. |
| What is my budget for this service? |
| | A qualified and experienced financial planner will cost you, but in the long run can bring you more clarity with your financial goals and general peace of mind. |
Understanding your needs is the key to a successful choice and you can revisit your list of needs at any time during the selection process.
Once you complete this Research step, having informed yourself about the essentials of financial planners and identified your needs, you are ready to move on to the next step: Evaluation.
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