7 Questions to Ask When Hiring a Financial Planner

The role of a financial planner is to help you and your family figure out how to best save, grow, and distribute your money in the most tax efficient way. Planners should provide short and long-term expectations with the same portfolio, which can be quite an undertaking. The value of the planner is that he or she provides the client an objective opinion of where best to put assets that will have the greatest likelihood of financial goal success.

Understanding the Role of a Financial Planner

Many people confuse a financial planner with a stockbroker, and then they find themselves playing the public market in ways that work against their goals. Further, planners are not public accountants; it is not their job to manage tax filings.

Because a planner acts as a professional adviser, they are often seen as filling in a gray area between the tax accountant and the brokerage trader. Some financial planners are also bridging the gap between CPAs and traders by offering investment management, tax solutions and full-service financial planning. That said, there are ways to make sure a planner is qualified to do the work needed for proper asset and wealth management. Here are seven questions that you should be asking when hiring a new financial planner. 

Question #1: How Long Have You Been Practicing?

While most planners are qualified, finding someone you trust with your savings and the future of your financial path is incredibly important. Everyone needs to get a start somewhere, but finding someone with experience is key. It may be helpful to know that for an advisor to be eligible for a CERTIFIED FINANCIAL PLANNER™ (CFP®) designation, they need to have at least three years of experience.¹  

Question #2: What Are Your Credentials?

Choose a financial planner who possesses the appropriate professional qualifications to meet your needs, such as the CFP® credential. To become a CFP®, the planner must pass testing that demonstrates they meet regulated educational requirements and professional standards.

Other credentials you may want to look out for include:

• Chartered Financial Analyst (CFA)
• Personal Financial Specialist (PFS)
• Retirement Management Analyst® (FMA®)
• Retirement Income Certified Professional® (RICP®)
• Certified Retirement Counselor® (CRC®)

Question #3: What is Your Educational Background and Area of Study?

It is important to understand a professional's academic qualifications. This is especially true if a planner has not been practicing for a long period of time.  Many universities now offer a major in financial planning in addition to the traditional finance and accounting majors. 

Question #4: What Is Your Niche?

Some financial planners may choose to work with a niche clientele - pre-retirees, retirees, doctors, women, etc. Alternatively, some planners are more accommodating to helping everyone who meets some general criteria - regardless of age or profession. 

Finding a planner who works with others like you is a great way to make sure they will understand your specific needs and be familiar with options available to you. 

Question #5: Do You Have References?

The CFP® board's website is a good place to start your search for a financial planner. If you are looking for a fee-only planner, the National Association of Personal Financial Advisors (NAPFA) provides a good start to find planners who carry high-level standards and ethical qualifications. Broker Check by FINRA is another helpful resource to review any complaints that may have been filed against the advisor you are considering working with. 

Question #6: What Are Your Retirement Planning Projections?

How much money will you be able to spend each year from now through your life expectancy? 

This is based on assumptions about:

• The rate of return of your assets
• The pace of inflation
• Your spending habits

You’ll want to work with a planner who is able to help you think in the long term and offer realistic expectations of what retirement may look like. They should be able to help you balance your ability to live comfortably today while preparing for a sound retirement.

Question #7: How Are You Compensated, Fee-Only or Fee-Based?

Transparency is important. Make sure your planner explains the fees clearly so you have a solid understanding of what you’re expected to pay and the services you will receive. 

The difference between fee-only and fee-based planners can be confusing to differentiate.  Following the CFP® Board's Code of Ethics and Standards of Conduct ² the two can be summed up as follows:

Fee-Only = Professional or professional's firm can not receive any sales-related compensation.

Fee-Based = Professional or professional's firm can receive sales-related compensation in addition to their fee.

Sales-related compensation can include, but is not limited to, stock/bond commissions, insurance/annuity commissions, mutual fund sales loads/12b-1 fees, revenue sharing, or referral fees.

If you would like to filter your search to fee-only advisors napfa.org, xyplanningnetwork.com and feeonlynetwork.com are three websites to consider.

When it comes to planning for your future, a strong financial planner is an important part of this process. Hiring a trustworthy financial planner is something to take seriously. Asking yourself these questions is an important step towards hiring the right person for you and your family.