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Check Out Your Financial Planner Carefully Before Handing Over Your Hard Earned Money
from: Pat MoauroWhen it comes to financial advice everybody has an opinion to offer it seems -- friends, family, neighbors and even strangers. Therefore more people are going to financial planners, believing that these people are professionals and know better.
Here are some things you should know about your financial planner:
1. Is the person qualified?
Anybody can say that he or she is an expert financial planner. No particular degree or experience is required. In the US there's no government department that oversees planners. Of the quarter of a million financial planners, only about 40,000 are Certified Financial Planners (CFP). The CFP is the most acknowledged designation for financial planning.
Even with this certification, there are no guarantees. Experience and continuous education plus a high degree of ethics and integrity are needed to be a professional planner.
One excellent option is to check his CFP status as well as his Personal Financial Specialists (PFS) and Chartered Financial Consultants (ChFC) status.
2. Is he looking after your interest or his?
Professional financial planners take their duties regarding your retirement plans seriously. They place your needs ahead of theirs. Unfortunately, most of the so called financial planners are just trying to sell you investments. They're not obligated to provide the best retirement plan but are only prevented from selling you an unsuitable plan.
Ask the financial planner to provide you a printout of the code of ethics with which he needs to comply. It's difficult read, but knowing the standards by which your planner must abide is vital.
3. How is your planner paid?
Some financial advisers still get most of their income through commissions. Many gracefully slide through the 'commission' tag by giving themselves the title 'fee-based' financial planners. They also simply duck the compensation subject.
Commission isn't really bad, but it creates a possible conflict of interest with the retirement planner. Your retirement planner should voluntarily tell you how he gets paid, or at least give a direct answer when asked.
4. A slice of the pie or the whole thing?
An excellent financial planner takes into account the client's entire financial situation, including her or his plans for estate and budgets. That's the only true way of looking at a comprehensive retirement plan.
Most of these financial planners simply focus on a single projection of a client's financial situation. In most cases, they focus only on the area in which they have received training. When your adviser focuses on one or only a few aspects of your retirement plan, find one who will take into account your entire situation.
5. This is what I'm selling. This is what you must buy
Financial planners lacking the necessary education in comprehensive retirement planning often rely on what their companies require them to invest in and sell. For example, a stockbroker may possibly hard sell certain mutual funds or individual stocks. This is also true even when the money can be best utilized by paying the mortgage or raising an emergency fund.
Your retirement planner must be able to discuss intelligently methods other than his recommendations. If he's unable to, or simply insists that his way is the best way, look for another adviser.
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