How to Choose a Financial Planner

In today’s unpredictable economic climate, being able to plan responsibly for your financial future is more important than ever.  However, most people are unable to go at the task of rearranging their finances and careful planning on their own: the system is complicated and an expert is advised for those looking to maximize their financial planning ventures.  Thus, more and more people are turning to financial planners to help them through the complex world of finance – but out of the thousands of financial planners available for hire, which one is right for you?

First of all, it’s important to be sure of what a financial planner does.  They advise their clients how best to save, invest, and grow their money.  In order to pick a financial planner that is attuned to your needs, it helps to know what your specific financial goals are.  Are you looking to save money for a relatively short-term goal – such as a downpayment on a house – or are you hankering to take on a broader look at your future, including paying for a child’s college education or preparing for retirement?  Some financial planners specialize in estate planning or other specific financial measures, while others work on a more general level.

Don’t confuse financial planners with stockbrokers, who people call to deal with stocks, accountants who manage your assets, insurance agents who work with the increasingly tangled world of claims, or a banker who wants you to get another mortgage.  Financial planners are just that – planners.

The most important credential that a financial planner can have is a CFP, which is alphabet soup for Certified Financial Planner.  Of course, a planner who possesses a CFP isn’t automatically guaranteed to be the planner for you or even a good planner at all, but it’s best to go with a planner who has this particular credential over one who does not.  Anybody, after all, can call herself a “financial planner,” but if they have a CFP it’s more likely that she’s genuinely knowledgeable about the field.  However, it’s still important to do your homework about prospective planners and see how their experiences and specialties dovetail with your wants and needs.

Financial planners charge in a variety of ways.  Some might charge a flat fee for a financial plan, while others will request an annual fee in the form of a percentage based on all of your assets.  Usually, this fee will be around or less than one percent.  Some financial planners also work on commission – that is, they take a cut whenever somebody buys or sells a stock or similar investment.  It’s generally a better idea to steer clear of financial planners who rely on commission, as they might not be the most unbiased when it comes to handling your financial matters; if they get a bigger cut from making a specific move with your money, it’s going to be more temping for them to go for the commission than the level-headed approach.

Another trick for steering clear of unscrupulous financial advisors is to look for a fiduciary.  This means that the planner has sworn to act in the client’s best interest, and is part of a society of planners who has pledged the same.  While this may not seem like a guarantee that they will, most members of a fiduciary do honor their oaths and financial advisors who are a part of one tend to be more scrupulous as compared to those who aren’t.

As for the rest of it, go out there and test the waters.  If it seems too good to be true – you speak with a planner and he brags about beating the market – it probably is.  But overall a financial planner is a smart move for most people; if paying 1% of your assets annually just for somebody to manage them for you seems like a waste of money, look at it as an investment in your future.  Most people who have financial advisors are pleased they made the leap, and their overall assets reflect this.

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