Financial Planners

How to Choose a Qualified Financial Advisor

Certified Financial Planners

Just about anybody can call themselves financial planners and many who know hardly a wit about the subject do – in order to sell their product.

So the first two things you want to look for in a qualified financial planner are competence and integrity.

Some people, like my wife, got an MBA degree in Finance and then after at least three years of work experience, go through another three years of study to get the designation of Chartered Financial Analyst. Only the wealthiest would need or could afford someone with these credentials. CFA’s usually manage portfolios for financial institutions.

Most people should, at least periodically, seek out the services of a professional adviser with the CFP – Certified Financial Planner - designation. These are financial planning professionals who study such topics as stock & bond investing, taxes, insurance, retirement and estate planning to get their certification.

The Certified Financial Planner Board of Standards administers the training and grants the certifications. In addition to passing the exam, a Certified Financial Planner must also have had a certain amount of work experience and agree to adhere to the CFP Board's code of ethics, professional responsibility and financial planning standards.

A Certified Financial Planner can work on a fee only basis, a commission basis or a combination of both. You are entitled to a free 30 minute introductory session with a CFP at which point you will learn how he charges, among other things.

To avoid conflicts of interest, you should choose a fee only planner. It will be more expensive, but you should get unbiased advice. If you work with someone who earns his living on commissions, he faces a built in conflict of interest.

While he is supposedly obliged to put your interests first, as often happens in the financial services industry, the planner might instead be steering you towards a product that pays him better rather towards one that suits your budget or purposes.

I am sure that most commission only CFP's try to do the right thing. But I also believe a big commission might sometimes get the better of them.

At the initial meeting, ask for the CFP’s Form ADV, which will disclose potential conflicts of interest. Read it carefully and question items that raise red flags.

The purpose of using a Certified Financial Planner is to have a trained professional who will work with you to help you understand your options and make the proper financial decisions.

If you desire he will draw up a financial plan that will match the goals you create, be it for retirement, college, a second home, etc.

Make sure the planner you are considering has at least five years experience dealing with persons in similar financial conditions to yours. You don’t need a planner that exclusively works with millionaires if you’re not one.

If you are working with a firm ask to meet the actual people who will be assigned to your account. Make sure they have the same qualifications and are as free from conflict of interest as the boss.

Finally consider whether he or she is a person you will feel comfortable working with.

You will be asked to divulge a lot of confidential personal financial information. You want it to be respected and guarded. You also want to be able to freely speak about your concerns without feeling condescended to or made to feel foolish.

To locate a Certified Financial Planner, contact the CFP Board.

A full financial plan drawn up by a CFP can run several thousand dollars.

Certified Public Accountants

Another option is a Certified Public Accountant with a Personal Financial Specialist designation. A CPA has already passed examinations on accounting and tax preparation.

CPA’s who are interested in offering financial planning services can become certified as personal finance specialists (PFS).

This designation is awarded by the American Institute of Certified Public Accountants to those who have taken additional training in personal financial services and already have received a CFP designation.

A CPA is a tax specialist. What makes a good CPA doesn’t necessarily make a good financial planner. In many ways, it takes a different perspective on things to plan for the non-tax related aspects of a financial plan.

Make sure you talk to any prospective CPA to make sure you are comfortable with his style and the way he thinks.

As with a CFP, delve into potential conflicts of interest. CPA's can and do sell commissionable products and get fees for referring clients to other professionals, such as insurance brokers, attorneys, stock brokers, etc.

Pay an hourly fee to someone who will help you, not his own pocketbook.

Expect a CPA's financial planning fees to rival those of a CFP.

You can find CPA’s with the PFS designation at AICPA.

Financial Professionals

Stock Brokers and Mutual Funds

Insurance Brokers and Agents

Attorneys

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