There are some bad apples in the financial industry, but working with a competent professional is still the best chance many people have to achieve a comfortable retirement. If you find a good adviser, they can be worth their fees many times over. Here are a few qualifying questions you should ask if you are thinking about hiring a financial planner:
What are your qualifications, and how do these qualifications benefit me? In an industry where titles mean very little, widely recognized qualifications can help you significantly narrow your search. There are many certifications that a financial planner can have, so don't worry if the person you are interviewing is telling you something you've never heard of. Just write them all down, and do your research later.
What exactly do you do for your clients? Many professionals who deal directly with customers are likely to prefer you talk about what you need so they can tailor their sales pitch to your problems, but you will be better served by asking them what they provide their clients. By inquiring about the service they provide you can more accurately gauge whether they are likely to be able to help you reach your goals. Ask questions and tell him what you need, but let the adviser start describing his job first.
Does the planner make tactical moves within your financial accounts, or do they simply recommend investments and hope you actually place those trades? Do they actually help you determine your financial priorities including looking at your income and savings, or are they really just a money manager who buys and sells stocks for you? These details are obviously important to find out ahead of time.
What is the income and asset level of your typical client? You want a planner who is used to working with people in your income and asset bracket. Extra points if the planner is similarly wealthy. This is because people with similar means have similar financial concerns and challenges. So when he solves another client's problem, he might have a solution for you if you ever run into a similar situation.
How are you compensated? Conflicts of interest are one of the biggest problems in the industry because many advisers and planners line their own pockets at the expense of their client's financial well being. That's why it's important to find out if there are any other ways the planner will make money from his relationship with you. I like fee-only advisers, because I never have to second guess whether they are likely going to benefit from recommendations they make to me.
Do you know anybody who can help me with other services? While you have the planner's attention, you should ask him or her for referrals to people like an accountant, estate planner, attorney and anything else you may need financial help with. It's better to have more options than you need so you can choose between several competent people to assist you. The referrals you are given may not be the best option out there, but at least you know the references won't be absolute duds since they are still trying to earn your business.
David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and figuring out whether a 0 percent balance transfer credit card makes sense.
- Banking & Budgeting