While financial planning is something one can do for themselves, sometimes it’s still better to get the advice of a trained professional. For those who are looking for some financial assistance, here are a few pointers to help lead you to the financial planner that will serve your needs.
Know What Type of Financial Planning You Want
The realm of finance covers a vast number of facets from saving to investments to taxes. The first step to finding a financial planner that is right for you is to determine your financial planning goals. Andrea Coombes and Anna-Louise Jackson from NerdWallet outline the six common financial planners — certified financial planner, broker, registered investment advisor, chartered financial analyst, enrolled agent, and wealth managers.
Most folks looking for a financial planner are looking for the first type, a certified financial planner that, on a basic level, provides advice on spending and saving habits. Brokers sell and buy financial products for a client, investment advisors have a primary focus on how to grow a client’s investment, chartered financial analysts’ area of expertise are investment portfolios, enrolled agents deal with taxes, and wealth managers assist those with vast amounts of, well, wealth.
Check Their Certification
The “gold standard” in financial planning is a Certified Financial Planner (CFP), according to Roger Ma with Forbes. This certification is regulated and determined through the Certified Financial Planner Board of Standards, and the requirements to receive this certification not only include specialized coursework, a six-hour exam, three years of experience, but also continued education every two years, according to the same article by Ma. Other certifications that can be helpful include Certified Public Accountant (CPA) or Accredited Financial Counselor (AFC).
Understanding your financial planner’s fee structure relates to conflict of interest. While it’d be nice to believe all financial planners undoubtedly do everything in their client’s best interest, there is the danger that external interests motivate the planner’s advice. This guide from the Wall Street Journal explains the dangers of commission-based advisors and fee-based advisors especially concerning conflict of interest. The article recommends advisors who are paid by the hour as the best fit for those just starting out in their efforts to financially plan their future.
The Big Question
One way to avoid the issue of conflict of interest is asking if your financial planner is a fiduciary. The standard of fiduciary indicates your financial planner’s pledge to act in your best interests. This article by Andrea Coombes on NerdWallet details why knowing about the fiduciary rule is essential when trying to find a financial planner for you. The industry does not require financial planners to abide by the standard of fiduciary which means if your advisor is not a fiduciary, they may have conflicts of interests.
Finances can already be stressful without
the added component of finding a financial advisor to handle those stresses.
Here are 10 more questions Andrea Coombes from NerdWallet suggests you ask your financial
advisor before settling on someone who will have access to your personal
information. While you can do your financial planning by yourself, you don’t
have to, and hopefully these pointers will help you find the advice you need.