Selecting a Financial Planner is a lot like selecting the family doctor. When selecting the person that is going to help you achieve your various financial goals keep in mind that this person plays an integral role in your success. Therefore, we advise that you do a Discovery Interview. This is nothing more than casual conversation wherein you determine whether or not the planner shares your values. A word of caution, do not present your values to the planner – ask the planner to share his or her values first.

To help clarify this issue, it is important to understand that when you deal with an accredited planner (see below) they are all trained professionals. This means they have the education and the knowledge. But financial planning and the ensuing process is all about Communication. It is imperative that you and your planner understand each other, that you and your planner are comfortable talking to each other. As a rule this means you share the same values. The quality of the advice you receive is predicated upon your planner understanding the importance as well as the meaning of the answer(s) you supply to his or her questions. If communication breaks down the process ceases to be effective, in some cases a misunderstanding can cause a very negative outcome.

What to Expect from Your Financial Planner

When you decide to use a financial planner, a good one will assist you in the following ways:

• Assess your relevant financial history, such as tax returns, investments, retirement and estate planning, wills, and insurance policies.
• Review your net-worth statement, examine your debts, and determine if any should be consolidated, paid off from other available funds, or refinanced.
• Help you decide on a financial plan, based on your personal and financial goals, history, preferences, and psychological investment risk-level.
• Identify financial areas where you may need help, such as building up a retirement income, improving your investment returns, buying or selling an insurance policy, tax saving suggestions, etc.
• Write down a financial plan based on your individual situation in language you can understand and discuss it thoroughly with you to make sure you are comfortable with it.
• Help you implement your financial plan, including referring you to specialists, such as lawyers or accountants, if necessary.
• Review your situation and financial plan periodically and suggest changes in your program when needed.

Guidelines for Selecting Your Financial Planner

There are several ways to look for a financial planner. One place to start is to look for planners who are certified. Certification does not guarantee that these people will be wise or creative planners. It does indicate, however, that they have studied important subjects of the financial planning field—such as wills, trusts, investments, taxes, home ownership, life and health insurance.

The major groups that represent financial planners who have taken courses and passed examinations are: the Registry of Financial Planning Practitioners of the Financial Planning Association (FPA); Chartered Financial Consultants (ChFC); Certified Financial Planners (CFP) and the National Association of Personal Financial Advisers (NAPFA). You can get a list of names of those in your area by writing to these organizations. (See our Industry Links)

"Registered Investment Advisers" are people who furnish investment advice for a fee and have registered with the Securities and Exchange Commission. This does not indicate that they are financial planners or have had any special training. However, by law, they are required to disclose their educational background and financial planning experience.

Recommendations of friends and colleagues may play a role as you select a financial advisor, however, an investment advisor who impresses one client may be unsuitable for someone else. Select a firm or individual who has the skills and expertise to meet your specific needs, including being sensitive to how much risk you are willing to take with your investments.

You may be invited to attend free financial seminars offered by various individuals or companies. Going to these seminars makes sense if you want to shop around before deciding what investments to purchase or which financial planner to work with.

Beware of planners who use high-pressure tactics or promise unusually high rates of return. Remember: no investment is so good that you can't go home first to think it over. Check with the local Better Business Bureau and Office of Consumer Affairs to see if any complaints have been lodged against the planner you may consider using. Be aware that because years may pass before investments are found to be worthless, it may take time before complaints surface against a particular financial planner.

Questions to Ask at the Discovery Interview

If you are looking for a financial planner, consider asking each one you interview the following questions:

1. What credentials do you have to practice financial planning?

Financial planners come from a variety of backgrounds and, therefore, may hold a variety of degrees and licenses. There are no regulations in most states for the financial planning industry. However, some take specialized training in financial planning and earn credentials such as Certified Financial Planner (CFP) or Chartered Financial Consultant (ChFC). Others may hold degrees or registrations such as lawyer (JD), Certified Public Accountant (CPA), or Chartered Life Underwriter (CLU).

You will want to question financial planners carefully about their background and experience. Be certain that any planner you consider hiring has ample knowledge of taxes, insurance, estate and retirement planning issues, as well as the basics of investments and family budgeting. Be wary of individuals who promote various investment items without discussing any overall financial planning goal. They may lack the expertise to formulate a plan much less monitor it.

2. Are you registered with the federal Securities and Exchange Commission (SEC) or with a state agency?

Anyone who may be giving advice on securities (including tax shelters), use of the stock market, or the value of securities over other types of investments should be registered with the SEC or registered under state law dealing with investment advisors.

3. How would you prepare my financial plan?

Financial planners usually prepare financial plans after carefully discussing and analyzing your personal and financial history, your current situation, and your future goals. Some financial planners enter relevant financial information into a computer to generate standard financial plans. This type of plan may be useful, but be certain your unique financial situation is taken into account. Be sure to find an advisor who will give you personalized advice for your situation.

4. How many companies do you represent?

Someone who represents only one or two companies is probably not a financial planner, but a broker or salesperson. It will be to their advantage to see you purchase only those products offered by the companies they represent. You may want to seek an advisor who can offer you a wide range of choices to suit your needs.

5. Who will I work with on a regular basis?

You will want to work consistently with someone who is completely familiar with your account. If you work with a large firm offering many financial services ask how the firm will provide a coordinated method of referral among the various experts who advise you.

6. How do you keep up with the latest financial developments?

You may want to look for a planner who enrolls in continuing education courses (or, perhaps, teaches in a business school) to keep current on tax and investment strategies. Regular members of the Financial Planning Association, for example, are required to complete 30 hours of continuing education every year in order to maintain full membership status.

7. Will you be involved in evaluating and updating the plan?

Financial planners should develop a plan specifically tailored to your situation and needs. Some planners also will include provisions for updating your plan to adjust to changes in your life, current economic conditions, and tax laws. A financial planner can and should provide for periodic reviews of your plan to show you the progress being made in reaching your goals. Ask if your planner can provide this type of ongoing service and what those services will cost.

Firing Your Financial Planner or Advisor

In the interest of clients and planners alike, this subject, however uncomfortable, needs to be addressed. Change is a fact of life. It is not uncommon over a period of years for a client and planner to grow apart. The reasons for this are too numerous to list here, but suffice it to say it is not uncommon nor is it necessarily a bad thing. Nobody has to be at fault and bad things don’t have to happen. The excellent financial planner or advisor does not want a client who does not have confidence in them or trust them. It is permissible and in fact probably a good idea to move to another planner or advisor for better service. In most instances you can move your entire portfolio without changing a single investment and at no cost to you. Changing financial representatives does not automatically mean liquidating and re-investing your portfolio. Your new financial representative generally takes care of all the paperwork and monitors the transfer. The single biggest criterion for firing someone (other than theft and misrepresentations) stems from a breakdown in communication. When you review the following, and if you find that for the past six months or more you can answer YES to any of the questions, you may want to consider finding another planner or advisor.

• Are you reluctant to call your financial representative with a question?
• Does your financial representative intimidate you?
• Do you feel the level of expertise of your financial representative is inadequate?
• Do you feel that your financial representative constantly talks “over your head”?
• Is the only time you hear from your representative is when there is a new sale to be made?
• Do you sometimes think your financial representative is watching out for themselves more than you?
• Do you dislike your financial representative?
• Do you feel like your financial representative dislikes you?
• Do you think that your financial representative is bored with you and your account?
• Do you constantly feel your financial representative does not listen to you or understand what you are saying?

We need to be careful here as it must be recognized that the above questions are based on your feelings and thoughts over a period of time. It is only fair to point out that everyone has a bad day and one incident does not warrant throwing in the towel. If you experience any of the above, first and foremost you should discuss it with your current financial representative. Often times the situation can be corrected immediately. But, if over a period of six months or a year you repeatedly get negative feelings about whom you are working with, it may be time to consider looking for a another planner or advisor.

You may have noticed that there is no mention of investment performance or investment returns. This is because the planning process is about relationships and communication. Chasing the best returns from the best guy on the block is not financial planning. There are always “better returns” to be had. If for no other reason it is because the best returns are always reported after they happen! Another and more likely fact is your investment portfolio is built upon your investment attitude and risk tolerance. Your financial planner builds a portfolio and advises you on products based upon your input in the process. No two portfolios are the same. What works and is acceptable for one may be extremely aggressive and totally inappropriate for another. Please note; switching from one representative to another based upon a specific investment or a promise of returns is not advisable. In fact, if a specific investment is your motivation you may want to discuss it with your current advisor to get another opinion.

If after sincere deliberation you decide it is time to move and you have located another individual that you are comfortable working with, you may want to write a brief letter to your existing financial representative informing them that you are no longer in need of their service. You do not have to explain yourself; after all it is your money and your future. As mentioned above, the excellent advisor or planner does not want to be in a relationship that lacks trust and confidence.