In our last post, we discussed tips on choosing an investment advisor. As many financial planners are also investment advisors, there is a good deal of overlap in what to look for when choosing a financial planner.
Below I will list the broad points that I mentioned in the previous article. You are welcome to visit the prior article in the link above to see more detail.
· How much experience does the advisor have and what type of experience exactly?
· What are their educational credentials?
· How do they approach investing? What is their investing style? What are they personally invested in?
· Why should you choose/trust this advisor and their firm?
· How long has the advisor been at their current firm and how many firms have they worked at in their career?
· Does the advisor financially benefit from placing clients in any particular securities?
· References.
It will help to start with some of the basic areas of practice that financial planners operate in. They are:
Retirement savings and income planning
Risk management and insurance planning
Tax and estate planning
Education planning
Investment planning
Many people do not find a great deal of need to utilize these services, so they are comfortable sticking with an investment advisor. For those who would like to explore these topics, it certainly is best to do so with someone who has a deep and wide breadth of experience. As you might imagine, the topics listed each require a great deal of study and practice to gain expertise in. Below are some questions and comments you may want to make to a financial planner you are interviewing, in addition to the ones listed above:
What areas of financial planning do you regularly practice? While a financial planner will typically provide a full offering, often they have particular strength, practice and study in one or two areas. This is worth asking before you state your top priorities in order to attain an un-inhibited answer.
How much of the work on financial planning is done within the firm versus outside service providers? The best answer to this question is 'We do as much of the work as we are qualified to do and refer the remainder out to qualified service providers whom we have worked with in the past'. For smaller firms, such as Noble Advisors, it is inevitable and necessary that some of the services be referred to service providers who may provide more specific guidance. For instance, as estate planning is concerned, you will need a lawyer to draw up documents once a strategy/plan is agreed upon. Even the large banks refer clients out to outside lawyers usually. The planner should be able to get specific about what aspects of the services they provide and which aspects are referred out.
How do you charge for your services? Some financial planners will be able to put a scope of work together and charge based on fee, whereas others make financial planning work part of the overall value of working with them. At Noble Advisors, for instance, we provide financial planning services complimentary for people who are/become investment management clients. Either way, ask if the planner receives any commissions from third parties for providing planning services. Commissions might come from specific insurance and/or mutual fund companies. It is ideal if your planner is fee only (as Noble Advisors is), however, many firms are not and can still provide objective guidance. If the planner is able to explain to you how they avoid conflicts, it can go along way toward building trust.
Ask for examples of success. If you went to the advisor concerning how to amicably separate a small business wen getting divorced, for instance, in the initial interview, you could ask if there is an instance when the planner has dealt with this type of matter, and if so, how.
These are some items to think about when approaching a financial planner. I urge you to take time to gather your thoughts and questions before walking into an appointment with a planner. This way, you will make the best use of your time and be able to make a decision on picking a planner with as many facts as possible.