How To Choose the Right Financial Planner For You

Whether you are struggling to manage your household finances more effectively, save for your children¹s college education, or provide for your retirement, you may benefit from the services of a financial planner. The California Society of CPAs (www.calcpa.org) points out that financial planning professionals can assist in defining your financial goals and in developing and implementing a strategy to meet them. They also can help you understand increasingly complex company benefit options so you can make the best choices for someone in your financial position.

Generally, financial planners have broad knowledge in such areas as tax planning, insurance, investments, and estate law. They also can possess a wide variety of designations, including personal financial specialist, (given only to qualifying certified public accountants), certified financial planners, and chartered financial consultants, among others. The key to selecting the right financial planner is to consider experience and credentials. You¹ll also need to understand how they are compensated and how it will impact what you pay for their services. In addition, you¹ll want to determine whether you are comfortable with their investment philosophy and management style.

Assessing Background and Experience
For the most part, only CPA financial planners are subject to the few licensing requirements mandated by governments. This means you¹ll generally have to review a prospective planner¹s background and credentials. Ask about the financial planner¹s education. Is he or she a member of a professional association? What are the ethical codes of those groups and does your prospective financial planner follow them? Is your prospective planner committed to ongoing professional education?

You also will want to ascertain how long the planner has been in business, the types of clients he or she serves (e.g., typical income level of those individuals), and commonly provided services. Financial planning services run the gamut from broad-based financial or investment counseling to recommending and selling specific financial planning products, such as insurance.

Individuals who provide advice about investing in securities generally must register with a government agency and if managing $25 million or more in client assets with the Securities and Exchange Commission (SEC). If they manage less than $25 million, they must register with a state securities agency (or more than one state, depending their business is located).

Before hiring an investment adviser, carefully read the adviser¹s registration form, called "Form ADV." This form has two parts: Part I has information about the adviser¹s education, business and any problems they may have had with regulators or clients. Part II outlines the adviser¹s services, fees and strategies. If the adviser is reluctant to share this form with you, take your business elsewhere.

Fee Based or Commissions?
Generally, financial planners are compensated in one of three ways:

By fee only for hourly work or by the project;
By fees and commissions (fee for planning and commissions for implementation); or
By commissions only for product sales.

The type of planner you select will depend on the service and products you are looking for. For example, if you want someone to develop a financial plan that you intend to implement yourself, then a fee-only planner who charges by the hour might be your best choice. However, if you want your planner to help you select specific investment or insurance products, provided the planner has access to a wide variety of products, a commission-based approach may be cost-effective.

Regardless of how the planner expects to be compensated, the California Society of CPAs recommends that you obtain a written estimate of the cost of all services. It¹s also wise to ask for a list of references.