Does the subject of finance intimidate you, or at least leave you in a state of slight confusion? Most people likely feel this way. Nonetheless, our financial well being is of utmost importance and requires detailed planning and strategy. This is where financial planners can be of assistance.
Whether you’re preparing for retirement, saving for your child’s college education or just want to make the most out of your assets, hiring a financial planner may be for you.
What is a Financial Planner?
Financial planners are investment professionals who help individuals assess their long-term financial goals and then make recommendations for investment products and services that will accomplish those goals along with a detailed plan of action.
Some financial planners can examine and plan for every aspect of your financial life, including deposit accounts, investments, taxes, retirement and estate planning and more. Others offer a more narrow focus and range of services.
Why Do I Need a Financial Planner?
If you have a substantial level of wealth and would like to not only preserve it, but grow it, too, you will need a professional to help you. As Emma Johnson of MSN Money states, “the fact remains that the financial landscape is increasingly complicated, and most people are not savvy enough — or interested enough — to navigate [it].”
Even if you consider yourself a financially savvy individual, you’re better off at least consulting a professional at some point. No matter how much you may know about finances, a financial planner is the ultimate authority. Even if you choose to devise your own plan, it is wise to hire a financial planner to look it over and make any necessary revisions.
Criteria for Hiring a Financial Planner
The Securities and Exchange Commission lists a few questions you should always consider when hiring a financial professional. They include:
- What are their credentials?
- How are they paid for their services?
- Can they provide references?
A certified financial planner is more likely someone to be trusted in the field than someone without the certification. In order to receive certification in financial planning, a person must hold a bachelors degree and have obtained a CFP certification. This includes courses in the mastery of over 100 financial topics like general principles of financial planning, investment planning, retirement planning and estate planning. Finally, they are given an exam, which they must pass to be certified.
A financial planner affiliated with the National Association of Personal Financial Advisors (NAPFA) is a huge plus as well and adds to their credibility.
You should also be sure to know how a financial planner gets paid because it may affect the guidance you receive. Some financial planners receive commissions for investments they recommend. This may present a conflict of interest when it comes to the investment advice they give you, but it is not always the case.
You may instead choose a fee-only financial planner who will charge you based on an hourly rate or as a percent of assets and does not stand to gain anything by making investment recommendations.
References are important as well, as with hiring any professional. A person may be a self-proclaimed financial planner yet be completely inept. Another consideration is hiring a financial planner from a large company, or an independent financial advisor. There are pros and cons to both.
In addition, you should never hire the first planner you meet unless they are the best out of several interviews you have conducted with others. Your trusted friend may have provided you with the name of planner who did great things with their portfolio. They very well may have, too. They may not, however, be the best fit for you. The only way you will know is if you spend time with several financial planners to discuss the above points first.
Finally, it is a good idea to run a background check on the financial advisor before you hire him or her. A background check can alert you to consumer complaints, see if they have had any disciplinary actions, verify their licenses and certifications, and more.