March 05, 2019
How do you know when you should hire a financial planner? Is there a magic salary you should obtain or an amount in your retirement account? What should you look for in an advisor? Everyone from the Wall Street Journal to Business Insider has written articles about when and how to choose an advisor, but let’s start with the basics.
What can a financial planner do for you? A financial planner provides you with advice on how to save, invest, and grow your wealth while tackling specific goals such as buying a house, saving for retirement, or paying for your kids’ college education. The planner will work with you to create a financial plan, which should be looked at regularly to make sure you are on track to meeting your goals.
Who should you hire? There are a couple of different ways to look at this question. First, let’s look at the type of individual that you should hire. You want the “gold standard” when it comes to financial planning, s you should look for a CERTIFIED FINANCIAL PLANNERTM (CFP®). Individuals who hold a CFP® designation are experts in the field of financial planning. They have passed a rigorous test and have met the experience and ethics requirements set forth by the Certified Financial Planner Board of Standards. Additionally, CFP® practitioners are required to continue their education on financial matters and ethics in order to maintain their designation.
The next way to evaluate a financial planner is to look at how the planner gives you advice and how they are compensated. The planner should be a fiduciary, which means that they are legally obligated to put your best interest ahead of their own. The financial planner should also work for a Registered Investment Advisor (RIA). Most fiduciary advisors use the term “fee-only” to describe their compensation. This means, that the advisor is only compensated by fees collected from their clients. They don’t receive commissions for selling investments or financial products. This eliminates many obvious sources of conflict or bias.
Now that you know what type of planner to look for, where can you find a CFP® that is a fiduciary? There are two reputable websites that come to mind. The first is the CFP Board’s website. The website has a feature where you can search for a CFP® professional in your area or one that meets your specific needs. The second one is the National Association of Personal Financial Advisors (NAPFA)’s website. Their site allows you to search for a fee-only financial advisor. On top of doing your online research, you should ask friends and family who they are working with.
Once you’ve identified a planner or two who you think could help you meet your goals, schedule a meeting either in-person or over the phone. Don’t forget to ask about the credentials they hold, how they are compensated, and if they will act as your fiduciary. These three questions are the best start for finding the right planner. The right financial planner will quickly become a valuable asset in helping you meet your financial goals.”
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