When it comes to your finances, you must have a professional you can trust. A financial planner can help you make sound financial decisions and plan for your future. But how do you choose the right planner for you? There are many factors to consider, and in this article, we will outline 12 tips to help you find the best planner for your needs!
- Understand What Financial Services You Need
- Find a Fiduciary
- Understanding Payment
- Look Over Their Credentials
- Search for Clarity With Your Advisor
- Find an Advisor Interested in Teaching
- Look for Fee-Only Advisors
- Learn All The Financial Advisor Options
- Consider How Much You Can Afford to Pay Your Advisor
- Confirm Your Advisor Works With a Reputable Custodian
- Ensure Your Advisor Has a Defined Financial Planning Process
- Make Sure There Are No Conflicts of Interest
Understand What Financial Services You Need
The first step in finding the right financial planner is understanding what services you need. Do you need help with investments, retirement planning, or estate planning? Or do you need comprehensive financial planning that encompasses all of these areas? Knowing what services and financial expertise you need will help narrow your search for a qualified professional.
Here are a few things to consider to identify the services you need.
- Do you require assistance with a budget?
- Do you wish to learn how to invest?
- Would you want help creating a financial plan?
- Is it necessary to update your estate plan or establish a trust?
- Do you need help filing your taxes?
Find a Fiduciary
When you’re searching for a financial planner, you want to find someone who is required by law to act in your best interests. This type of professional is called a fiduciary.
There are three types of financial professionals who are legally allowed to give advice: fiduciaries, investment advisers, and broker-dealers. Of these three, only fiduciaries are legally required to act in your best interests.
Investment advisers and broker-dealers are held to a different standard, called the “suitability rule.” This rule requires them to make suitable recommendations, but they aren’t required to act in your best interests.
Financial planners typically charge in one of three ways: hourly billing, project fees, or percentage of assets. It is important to understand each type of payment and know how your financial planner charges clients before hiring one.
- Hourly billing is just like it sounds—you’re charged an hourly rate for the time spent working on your financial planning. This is a good option if you only need help with a specific task or project.
- Project fees are flat fees charged for a specific project, such as creating a retirement plan.
The percentage of assets
- The percentage of assets method is the most common way financial planners charge fees. This method pays a percentage of your investable assets each year. The fee is generally between 0.50% to 0.95% per year.
Look Over Their Credentials
When you’re looking for a financial planner, you want to make sure that you’re working with someone who is qualified and experienced. There are a few different credentials that a financial advisor can have, and each one indicates a certain level of expertise.
The first credential to look for is the Certified Financial Planner (CFP) designation. This designation is only awarded to those who have completed an extensive educational program and passed a rigorous exam. CFPs must also adhere to a code of ethics and maintain their skills through continued education. If you’re looking for comprehensive financial planning advice, working with a CFP is a good option.
Another credential to look for is the Chartered Financial Analyst (CFA) designation. This designation is awarded to those who have passed a three-level exam and have at least four years of professional experience. CFAs focus on investment analysis and portfolio management, so if you’re looking for help with investing, working with a CFA may be a good option.
Finally, the Certified Public Accountant (CPA) designation is another good indicator of a financial advisor’s qualifications. CPAs must pass an extensive exam and complete continuing education requirements. They also have experience in tax preparation and financial reporting, so if you’re looking for help with your taxes or other financial needs, working with a CPA may be a good option. All in all, when you’re choosing a financial advisor, it’s important to look at their credentials to make sure they have the expertise you need.
Search for Clarity With Your Advisor
A financial advisor who is clear in their messaging is essential for a number of reasons.
- Clarity helps to build trust. If a financial advisor is able to explain their strategies and recommendations in a way that is easy to understand, it will help to build confidence and trust.
- Clarity helps to avoid misunderstandings. If an advisor is vague or uses jargon that clients don’t understand, it can lead to confusion and frustration.
- Clarity helps to ensure that clients are making informed decisions. If an advisor is unclear about a financial strategy’s potential risks and rewards, it could lead to clients making decisions that are not in their best interests.
Financial advisors need to be clear in their messaging for all of these reasons.
Find an Advisor Interested in Teaching
When you’re looking for a financial advisor, it’s important to find someone who is interested in teaching. Why? Because working with an advisor who’s willing to teach can have a number of benefits. For one, you’ll be able to learn about investing and money management.
If you’re working with an advisor who is interested in teaching, they’ll be more likely to take the time to explain things in a way that you can understand. They’ll also be more patient when it comes to answering your questions. And, most importantly, you’ll be able to develop a better relationship with your advisor, since they’ll be taking the time to get to know you and your financial goals.
Look for Fee-Only Advisors
When you’re choosing a financial advisor, it’s important to look for someone who is fee-only. Fee-only advisors are paid based on the services they provide, not commissions or kickbacks from the products they sell, like fee-based advisors often are. This means that their only motivation is to help you reach your financial goals.
Fee-only advisors typically charge an hourly rate, a flat fee, or a percentage of the assets they manage for you. They may also receive performance-based fees, but these are usually only charged on investments, not other financial products. So, if you’re looking for unbiased financial advice from someone who is solely focused on helping your best interest, consider hiring a financial advisor.
Regardless of how they’re paid, what’s important is that you know exactly how much you’re paying for their services, because fee-only advisors are required to disclose all fees upfront.
Learn All The Financial Advisor Options
There are many different types of financial advisors, each with their own unique set of credentials and qualifications. How do you know which one is right for you? Here’s a quick guide to the most common types of financial advisors to help you make an informed decision:
- Broker-dealers: salespeople who earn commissions from the financial products they sell.
- Certified Financial Planners (CFPs): must pass a rigorous exam and offer financial planning services, from retirement and investment planning to insurance and estate planning.
- Financial Consultants: offers a broad range of services, from investment advice to retirement planning.
- Investment Advisors: provide advice on where to invest money and how to manage those investments.
- Robo-Advisors: an automated investment service that provides advice and portfolio management.
- Wealth Advisors: a financial advisor who provides comprehensive financial planning and wealth management services.
Hiring a financial advisor is a big decision. But, if you do your research and take the time to discover what type of financial services you would benefit the most from, you will be able to choose the best financial advisor for your specific needs.
Consider How Much You Can Afford to Pay Your Financial Advisor
Not all financial advisors are created equal – some are more expensive than others. When you’re trying to choose a financial advisor, it’s important to consider how much you can afford to pay. If you’re a HNWI, you might be able to afford a more expensive advisor.
If you’re working with a tight budget, there are still options available to you. Robo-advisors, for example, typically charge lower fees than financial consultants. And, if you’re comfortable managing your own investments, you may be able to find a fee-only advisor who charges by the hour or a flat fee, rather than a percentage of your assets.
On the other hand, if you have a more sizable budget and are looking for comprehensive financial planning services, you may want to consider hiring a wealth advisor. These advisors typically charge higher fees than other financial advisors, but they also offer a wider range of services, including investment advice, wealth management, retirement planning, and estate planning.
No matter what your budget is, there’s a financial advisor out there who can help you reach your financial goals.
Confirm Your Advisor Works With a Reputable Custodian
When you’re trying to choose a financial advisor, it’s important to confirm that they work with a reputable custodian. A custodian is a financial institution that holds and protects your assets, like stocks, bonds, and mutual funds.
There are many different custodian banks out there, like J.P. Morgan and Citigroup to name a few, and not all of them provide the same services as their competitors. It is also important to note some custodian banks are more reputable than others, so it’s vital to do your research and choose one that you feel comfortable with.
Your financial advisor should be able to give you a list of the custodian banks they work with, as well as their professional opinion on which one they would recommend based on your financial needs.
Ensure Your Advisor Has a Defined Financial Planning Process
When you’re meeting with potential financial advisors, be sure to ask about their financial planning process. A good financial advisor will have a defined process in place that they follow with all of their clients.
This process should include an initial consultation to get to know you and your financial goals, as well as regular check-ins to monitor your overall progress. Your advisor should also be available to answer any questions you have along the way as you continue to work together and build a professional relationship.
Asking about an advisor’s financial planning process is a great way to get a sense of their level of experience and professionalism. If they don’t have a defined process in place, or if they’re unable to explain it to you in a way that is understandable, it may be best to look elsewhere for financial advice.
It’s important to find a financial advisor that you feel comfortable communicating with. After all, you will be sharing sensitive information about your finances, and you need to know that your advisor is someone you can trust.
Make Sure There Are No Conflicts of Interest
When you’re trying to choose a financial advisor, it’s important to make sure there are no conflicts of interest. A conflict of interest occurs when an advisor recommends an investment that is not in the best interest of their client, because they stand to benefit from it financially.
For example, if your financial advisor is also a stockbroker, they may recommend that you invest in a particular stock because they will earn a commission if you do. Or, if your advisor is selling insurance products, they may try to sell you a policy even if it’s not the best fit for your needs.
The easiest way to avoid conflicts of interest is to choose an advisor who is a fee-only financial planner. Fee-only planners are compensated solely by the fees they charge their clients, so they don’t have any incentive to sell you products that you don’t need.
When it comes to your finances, you also want to make sure that you are working with an advisor that you can trust. With the right financial advisor, you can rest assured knowing that your finances are in good hands. And, with their help, you can reach your financial goals and grow your wealth.
Frequently Asked Questions
When Should You Start Talking to a Financial Advisor?
If you’re just starting to think about financial planning, you may be wondering when is the right time to start talking to a financial advisor. The answer is: it depends. If you have complex financial needs, or if you’re not sure where to start, a financial advisor can help you with any questions you might have and provide financial advice based on your best interests.
Where Can I Get Free Financial Advice?
If you’re looking for free financial advice, a good place to start is by talking to your friends and family. Many people have personal experience with financial planning, and they may be able to give you some helpful tips. You can also find free financial advice online.
What’s The Difference Between a Financial Planner and a Financial Advisor?
A financial planner is a type of financial advisor who helps people create a plan to meet their long-term financial goals. Whereas financial advisors provide guidance on a variety of topics, including investments, retirement planning, and estate planning.
How Much Do Financial Advisors Cost?
The cost of a financial advisor varies depending on the services they provide and how they charge for their services. Some advisors charge by the hour, while others charge a flat rate or a percentage of assets under wealth management.