Picking a Financial Planner >

You may decide that you need or want some help in creating your own strategic retire early plan. Or for guidance once you decide to make the leap into retirement. Picking a Financial Planner can be a little intimidating with all the various credentials you will see out there. It can be hard to make sense of what you should look for.

I decided at age 40 that I wanted to retire when I reached age 50. My retirement savings rate was pretty good  but I needed a little more help. I wanted someone who could take a dispassionate view of my investments, insurance, and goals and help me set the right plan. My very own Strategic Retire Early Plan.

This was back in 1998 and a very different time. Now you can find and learn almost anything yourself on the internet and go it alone if you have the time, aptitude, and eagerness to do so. However for many people there may be a need for a financial planner. They can offer their broader-based recommendations based on your personal financial situation to get you to your goals.

Reasons why you might want financial planning help.

As I mentioned above you can do the work yourself. Do your research and learn everything you need to learn about personal finance, insurance, and investing. Nothing says you shouldn’t still do that even if you choose to find a financial planner. To me it is like building a house, repairing a car, or stitching up a gash in my arm. Sure I could try to learn how to do it but maybe it’s best I go to professional. Someone who has extensive training and experience in this specialized field. We all can’t be great at everything.

That said, some people are very good at self-financial planning. If you are then go for it. I happen to be pretty good at performing many auto repairs so I get that. I just wasn’t that on top of financial matters.

There are many reasons someone would consider professional assistance.

You may be a super investor using low-cost Vanguard Index funds to start your investing. But as your assets grow you may want to see if there is anything else that you should do to manage risk.

things to consider when Picking a Financial Planner
Photo by Aidan Bartos on Unsplash

You may be older and have invested and now have built-up a nice nest egg. But your options and goals are getting more complex. Goal timelines are shrinking. Using a financial planner may be a time saver for you in your busy life.

A financial planner can give the necessary financial discipline to stay the course when things go sideways. Keeping you from selling low and buying high with panic or herd mentality decisions. They can also help you maintain discipline with your retirement strategy. By identifying and then helping you manage your financial strengths and weaknesses.

You should still learn all you can and care to learn about personal finance

Having a financial planner may give you comfort having the knowledge that someone you can trust is working with you to meet your goals. You will pay for this service. For many it can cost from 1% to 2% which is no small thing. However you get the full spectrum of their knowledge and advice. That may be worth the fee you have to pay to be successful in your goals.

This isn’t an all or nothing arrangement. You can still do some minor self-planning and investing on the side. You can decide to go the full self-planned route after learning more about personal finance. Maybe once your financial goals are met and set. That is certainly the camp I am in while on this financial independence adventure.

What to look for when picking a financial planner.

Fiduciary

You of course want to find an expert. Someone that will help you reach your goals with your best interest in mind. There are many different credentials thrown around but the one I believe to be very important is look for a fiduciary. They are held to a higher standard and have pledged to ALWAYS act in your best interests. Non-fiduciary planners are held to the lower “sustainability” standard. Meaning acting or selling products that are suitable for you. Not the higher standard of being in your best interest or ideal for you.

CFP (Certified Financial Planner)

This is probably the best known credential and I believe the one to look for. This means they took a series of courses and passed an extensive 10 part exam over a two-day period. This rigorous test is administered by the Certified Financial Planner Board of Standards. They must have also completed a minimum of 3 years work experience to earn the CFP designation.

CFPs also must complete 30 hours of continued financial and ethics education every 2 years to keep the CFP credential. The CFP coursework will take a couple of years to complete and covers every aspect of personal financial planning.

You should understand that having this credential and being a fiduciary may not be a guarantee of a good match for you. Be picky when choosing your planner. Ask people you know for references. Pick 2 or 3 CFPs to visit and see if they are an experienced planner successfully advising other clients in your same stage of life.

I saw 2 CFPs before landing with mine. They others simply called my goal of retiring at age 50 unrealistic. When I met my planner he not only agreed we could come up with a reasonable and workable plan but he also had plans of retiring young in his 50s around my same time-frame too.

Other Financial Planning Credentials that you may see

ChFC (Chartered Financial Consultants)

This designation is earned from the American College in Bryn Mawr, PA of which also grants insurance-business certification. This means the planner has completed an eight-course sequence over a 2 to 4 year period and passed two-hour exams on each.

RFC (Registered Financial Consultants)

These consultants have met the International Association of Registered Financial Consultants requirements. This designation means they met certain work-experience and academic guidelines.

There are many other Financial Planning designations.

Some of the other financial planner designations are -CIMA (Certified Investment Management Analyst), CRC (Certified Retirement Counselor), CRFA (Certified Retirement Financial Advisor), CSA (Certified Senior Advisor).

All give some level of assurance that the planner took the time to improve their knowledge and expertise in personal financial matters but having a designation is no guarantee by itself, so be vigilant and check credentials and references.

Finding Fee Only Practitioners.

You can find a directory of fee-only advisors at the National Association of Personal Financial Advisors (NAPFA). They have a registry service that provides the names of members in your area along with consumer information related to personal financial planning. These fee-only NAPFA practitioners accept no commissions and meet or surpass requirements for CFP fiduciary planners.

How Financial Planners are paid

There isn’t a standard pay system in place. Some are fee based like an attorney charging an hourly or performed-service rate. Others operate almost exclusively on commissions. Making their money from the financial products they recommend and sell to you.

In the middle of all of this are planners who make their money from a combination of both. Be careful when working with a commission only planner. They may be financially biased about the products they offer.

Many financial planners aren’t taking a cut from life insurers or fund companies. Instead you may pay a flat fee (like $1100) for a personal financial plan. Some use a wrap-fee structure. Those are usually in the 1% to 2% range of all assets that are under their watch. The more you have invested under their control the lower your wrap-fee may be.

Verify your selected planner

You certainly don’t want to entrust your money with a planner that has been convicted of crimes or has been or is being investigated now by a regulatory body or investment industry group. It would make sense to ask them for references of people they plan for in the same financial situation you are in and with similar goals. But keep an open mind. They surely will only give you known good references.

You should do a web search on them to make sure their claimed credentials are current. You can check for any discipline records at the CFP Board Website for a CFP you are interested in doing business with.

In Closing.

Picking a Financial Planner should be done carefully. Once you make your decision you should feel totally comfortable with them and the direction you will be going with them. It isn’t mandatory for everyone to have a financial planner to reach their financial goals. But if you have made the decision to have some professional financial planning help. Then understanding how the financial planning industry works can help you feel comfortable that you have selected the best partner to make your financial goals come true.


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