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Your Search For A Financial Planner

 

What You Should Know Before Hiring A Financial Planner

Ok, you’re ready to work with a financial planner and get a grip on your financial life. You might have already done some research, searched the web, talked to friends and family for referrals and that has landed you here. This process can be confusing, so we want to help you get where you want to go.  

 

What Is A Financial Advisor?

Often times the term financial planner and financial advisor are used interchangeably. Pretty much anyone can call themselves a financial advisor: commissioned stockbrokers, insurance agents, registered representatives, account executives, even the person selling annuities and mutual funds at your local bank. One minimum requirement would be to select a Certified Financial Planner® (CFP®) or someone with a Masters in Financial Planning (MSFP). A CFP® is licensed and regulated. They are also required to maintain their CFP® mark through continuing education in all areas of financial planning. 

 

How Are Advisors Compensated?

The compensation structure can play a significant role in determining a financial advisors's objectivity. Below is an explanation of the three ways in which financial advisors get paid. 

 

Three Models of Compensation

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What Is A Fiduciary & Why Is This Important?

The fiduciary standard requires the financial advisor to act in your best interest. The suitability standard is a much lower requirement - it means that the product you are sold is "suitable" for you net worth and risk tolerance.  If a financial advisor is a fiduciary, you can glean additional information in their form ADV. This form is required to be given to you and discloses a litany of  information - conflicts of interest, their background, fee structure, and practice structure, to name a few. You may be tempted to skip reading this document, but do take the time.

 

 

 


More Questions To Ask?

Now that you have explored how a financial advisor is compensated, you've read their ADV, they're may be a few more common questions to ask. 

1. Will they prepare a written plan?

2. Does the advisor ask you good questions about your money history, expectations for the relationship, what your primary purpose is to work with an advisor?

3. How long have they been in business and has their business changed over the years?

4. How many clients to they work with and what type of clients?

5. Do you feel comfortable talking to this persona and do you feel you are being heard? Do they seem to care about you as a person?

 

For additional questions, here is a link that may help you. NAPFA Field Guide: What To Ask

 

What Is It Worth To You?

Below is a chart that may help to explain the value of a financial planner’s advise. Some financial planners skim the surface of each area of personal financial planning. Others, like us at Alexander Financial Planning, provide a more holistic approach to financial planning. Until you work with a financial planner, it is difficult to quantify the value you will receive in the advice you are given. The chart below may help to better communicate the benefit. 

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