So, you’ve decided you need some assistance meeting your financial goals? Great. A financial planner can be an immense help setting up budgets and devising a broad plan for your saving and investing. But opening your private financial details, spending habits, and aspirations to a professional is a deeply personal choice. Having the right questions for a planner is critical. Here are six questions to ask financial planners before you decide to work with one:
What experience and qualifications do you have? Find out how long the planner has been in practice and their overall career history. Ask the planner to briefly describe her work experience and how it relates to her current practice. Ask the planner whether he or she is recognized as a Certified Financial Planner (CFP), a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC).
Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career? Several government and professional regulatory organizations, such as FINRA (formerly NASD), state insurance and securities departments, and CFP Board keep records on the disciplinary history of financial planners and advisors. Ask what organizations the planner is regulated by and contact these groups to conduct a background check.
What services do you offer? Generally, financial planners can’t sell insurance or securities products such as mutual funds or stocks without the proper licenses. They can’t give investment advice unless registered with state or federal authorities.
How will I pay for your services and how much do you typically charge? The planner should tell you–in writing–how she’ll be paid for her services. Even without a clear sense of your particular needs, the financial planner should be able to offer an estimate of costs.
Do you work with an independent custodian? Whether your advisor is managing your money or you are the person who signs off on each financial decision, your advisor should not be holding your funds. Your money should be held by an independent custodian company. Make sure you know the name of the company; how to contact the company; and your account numbers.
Will I be able to review all transactions? The answer should be “yesâ€. When you receive your statements, be sure you look at all transactions. Make sure you understand each purchase, sale, deposit and withdrawal and why it was made. Like any relationship, your bond with your planner should be based on trust, honesty, and openness.
Dos and Don’ts of Choosing a Financial Planner
–Don’t jump into the relationship without doing your homework first
–Do find out what the planner’s experience and qualifications are
–Don’t assume that your friend’s financial planner will be the right one for you
–Do keep tabs on all transactions and other dealings related to your portfolio
–Don’t feel that you have to work with the first financial planner you interview
–Do seek out a new financial planner if your first choice isn’t working out
An expanded version of this article will appear in the December 2009 issue of Black Enterprise magazine.
Wealth For Life Principles
1. I Will Live Within My Means
2. I Will Maximize My Income Potential Through Education and Training
3. I Will Effectively Manage My Budget, Credit, Debt, and Tax Obligations
4. I Will Save At Least 10% of My Income
5. I Will Use Homeownership as a Foundation For Building Wealth
6. I Will Devise An Investment Plan For My Retirement Needs And Childrens’ Education
7. I Will Ensure That My Entire Family Adheres To Sensible Money Management Principles
8. I Will Support the Creation and Growth of Minority-Owned Businesses
9. I Will Guarantee My Wealth Is Passed On To Future Generations Through Proper Insurance And Estate Planning
10. I Will Strengthen My Community Through Philanthropy