How to Choose a Financial Planner

Four years ago, Eddie and Eugenia Russell of Williamsburg, Virginia, found themselves with a little extra cash from their real estate investments. When their title professional inquired about what they planned to do with the money, the Russells looked at one another and shrugged. “The guy from the title company handed me a business card from a financial planner he’d been working with,” says Eddie Russell, “so I decided to give her a call.”

Prior to that, Russell says the only financial planning he’d done was investing with a previous employer, opening a money market bank account, and purchasing a couple of certificates of deposit (CDs). He made the phone call to Katherine L. Brown, a financial planner in Newport News, Virginia, and says he was “immediately impressed with her presentation and the way she thoroughly went over the entire financial planning process.”

Unlike the type of financial planners who invest a client’s money and then receive a commission for their efforts, Brown is a fee-only planner who is paid by her clients either via hourly fees or a retainer fee based on their assets. Russell says he opted for the fee-only planner to avoid front-loaded fees (which concentrate the bulk of the fees in the “early” period of the investment) and to ensure his planner would make the best possible investment decision and not just push specific products in trade for a commission.

In exchange for the fees (Brown charges about $150 per hour), the Russells received a complete portfolio makeover that included a variety of investment options. “Our planner detailed for us everything that she was going to do with the money,” says Russell, “and meets with us upon request to discuss the portfolio’s performance and tweaks it every quarter.”

Some of the criteria that Russell used when choosing a planner had nothing to do with money management or credentials. In reality, he says the fact that Brown was humble and patient ranked among her most impressive qualities. She returned calls quickly and operated from a modest, non-showy office. “After combining those traits with her financial expertise,” says Russell, “we decided to give her a shot.”

The Right Choice
The key is to find a competent, qualified professional whose approach fits your needs. But, the selection process isn’t always easy.

One of the biggest differentiators among planners is the way they’re paid. The Russells’ planner, for example, is an independent professional who works on an hourly rate. Known as fee-only planners, these individuals sometimes alternately charge fees based on a percentage of a client’s assets and/or income.

Fee-only planners are appropriate for anyone who can afford to spend $150 to $400 per hour, or the flat rate, in exchange for a planner who is “on call” and able to create a comprehensive plan that includes investment advice, retirement planning, wealth management, college savings, and other financial services. Such planners pride themselves on giving “independent” advice that’s not based on the sale of a certain product or service.