Before establishing a relationship with a financial planner or advisor you will want to interview several people to make sure they’re the right match for you.
Ten Important Questions to Ask
- What experience do you have? Ask for a brief description of the financial planner’s work experience and how it relates to their current practice. CFP® professionals must have a minimum of three years planning experience. Check and verify their background.
- What are your qualifications? Ask about the credentials your planner holds, and learn how he/she stays up to date with current changes and developments in the financial planning field.
- What financial planning services do you offer? Credentials, licenses and areas of expertise are all factors that determine the services a financial planner can offer. Generally, financial planners cannot sell insurance, or securities products such as mutual funds or stocks, without proper licenses. And they cannot give investment advice unless registered with state or federal authorities.
- What is your approach to financial planning? Make sure the planner's investing philosophy isn't too cautious or overly aggressive for your needs. Learn how he will carry out recommendations or refer tasks to others.
- What types of clients do you typically work with? Some financial planners prefer to work with clients whose assets fall within a particular range, so it's important to make sure the planner is a good fit for your individual financial situation. Keep in mind that some planners require you to have a certain net worth before offering services.
- Will you be the only financial planner working with me? Some financial planners work with their clients directly, and others have a team of people that work with them. Ask who will handle your account, meet them, and ask whether the planner works with professionals outside his own practice, such as attorneys, insurance agents or tax specialists. If yes, get a list of their names to check on their backgrounds.
- How will I pay for your financial planning services? Planners can be paid in several ways: through fees, commissions, or a combination of both. As part of your written agreement, your financial planner should make it clear how they will be paid for the services to be provided.
- How much do you typically charge? Although what you pay will depend on your particular needs, the planner should be able to provide you with an estimate of possible costs based on the work to be performed. Costs should include the planner's hourly rates or flat fees, or the percentage of commission received on products you may purchase.
- Do others stand to gain from the financial advice you give me? Ask the planner to provide you with a description of his conflicts of interest in writing. For example, financial planners who sell insurance policies, securities or mutual funds will have a business relationship with the companies that provide these financial products.
- Have you ever been publicly disciplined for any unlawful or unethical actions in your career? The CFP Board, the Financial Industry Regulatory Authority (FINRA), and your state insurance and securities departments each keep records on the disciplinary history of financial planners and advisors. Ask which organizations the planner is regulated by and contact these groups to conduct a background check.
Seven Suggested Key Traits to Look for in an Advisor
- Competence: A good financial advisor should be well-educated, and able to demonstrate a significant amount of experience.
- Objectivity: Your needs should be at the heart of all your planner's recommendations. Your financial advisor should consider your situation carefully, then give you advice that best meets your goals. This approach may require your planner to explain that your goals are unrealistic, given current resources and financial commitments.
- Integrity: Trust is central to a successful financial planning relationship. You rely on your planner's honesty, professionalism and abilities to achieve your goals. When you know your planner takes his/her financial planner duties and responsibilities seriously and places principles over personal gain, you can form a good working partnership.
- Clarity: Fair treatment means your financial planner/advisor will clearly state what services will be provided and cost. Your planner will also explain the risks associated with their financial recommendations, along with any potential conflicts of interest. For example, does the financial planner gain personally or financially from your purchase of a particular product or from the outcome of a suggested strategy?
- Diligence: Before engaging you as a client, your financial planner/advisor will discuss your goals and objectives and explain what you can expect from the relationship and financial planning services. Once your planner has determined that he or she (or their staff and/or network of related professionals) can assist you, the planner will make recommendations suitable for you. A diligent financial advisor will reasonably investigate the products or services they recommend and closely supervise any staff working with you.
- Compliance: Your financial planner/advisor should not provide investment advice or stock brokerage services unless they are properly qualified and licensed to do so, as required by state or federal law. A financial planner who holds CFP® certification may not be a broker/dealer, which refers to an individual who is licensed to buy and sell investment products for or to clients.
- Privacy: To get the best results from your financial planning relationship, you need to divulge relevant personal and financial information to your financial planner on a regular basis.