How to Choose a Financial Planner

Professional advisers operate in a variety of ways and get paid differently too

Commission planners, on the other hand, sell products (such as life insurance) and are typically paid by the third parties that develop those products. Such planners can be appropriate for individuals who are just getting into the investment scene and lack the funds needed to pay a fee-only planner’s rates.

Brown, who is president of The Advisory Firm of Katherine L. Brown L.L.C., has worked both as a commission-based and fee-only based planner, and says the consumer with substantial investable assets (say, more than $1 million), might opt for a fee-only planner. A commission-based planner may be appropriate for new investors with little or no investable assets who might find a fee-only planner’s hourly rates expensive.

When deciding which planner makes the final cut, consumers should consider both their current financial picture and future goals. If, like the Russells, you’re concerned about investments that come with heavy fees, and if your end goal is to possess a comprehensive portfolio, then a fee-only planner will likely be worth his or her salt. But if you don’t mind paying commissions on securities products, and you need items such as permanent life insurance and long-term care insurance, “then a commission-based adviser may be your best choice,’” says Brown.

Althea DeBarr-Johnson, an attorney in Atlanta, says she advises her clients to pick a financial planner who is licensed to work on commission and hourly or flat rates, or the “hybrid” option. This will give you access to a wider variety of products and services from a single source, she says.

When shopping around, consumers should ask about credentials and licenses, and seek out a professional who will serve as your fiduciary or “trusted adviser,” and not just a product salesman. Ask for client references and don’t be afraid to call them up to find out about their experiences dealing with the planner.

Russell, who is satisfied with his choice of a fee-only planner, advises investors to avoid planners who are trying to “push products on you,” and to seek out those that can discuss your complete financial picture, including retirement, college, insurance, and long-term care. “Do your homework before you go in and meet with the person,” says Russell. “Know what questions to ask and what you want out of the relationship.”

Having the right questions for a planner is critical. Here are six questions to ask before you decide to work with one:

1. What experience and qualifications do you have?
Find out how long the planner has been in practice and for an overall career history. Ask the planner to briefly describe his or her work experience and how it relates to his or 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). You can verify whether the planner is certified and/or licensed as a registered investment adviser at www.cfp.net or www.fpaforfinancialplanning.org.

2. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?
Several government and professional regulatory organizations, such as the Financial Industry Regulatory Authority or FINRA (www.finra.org), state insurance and securities departments, and the Certified Financial Planner Board of Standards Inc. (www.cfp.net) keep records on the disciplinary history of financial planners and advisers. Ask what organizations the planner is regulated by and contact these groups to conduct a background check.

3. 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.

4. How will I pay for your services and how much do you typically charge?
The planner should tell you—in writing—what type of payment they accept for services. Even without a clear sense of your particular needs, the financial planner should be able to offer an estimate of costs.

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