Only 35% of people have a plan in place in case of a financial emergency, and the number gets even smaller when looking at savings for goals like retirement or college funds. Which is why hiring a financial planner is a decision that can really suit anyone.
Read on to learn more about what a financial planner is, who they are best suited for and what to look for if you choose to hire one.
What is a Financial Planner?
Before we dive into hiring a financial planner, it’s important to have a full understanding of what a financial planner is and what they are responsible for. This will help you decide if hiring one is the right choice for you and your family.
A financial advisor is simply a qualified professional that advises you on the best way to use your money to meet your goals. These goals can be anything from planning your retirement to saving for your kid’s college fund. It’s important to keep in mind that you and you alone decide how much decision making power your financial advisor is allowed to have.
Who Should Consider Hiring a Financial Planner?
Often when people think about hiring a financial planner, they imagine it for more corporate situations or for individuals running larger businesses. However, a financial advisor can be a solid fit for anyone, as the majority of people do not have strong money management skills.
Not only does having a financial advisor gives you peace of mind that a plan has been created and set into action to get you to your goal on time, but also there’s a feeling of accountability since you will be working with someone that expects you to adhere to the plan.
Certification & Accreditation
When you’re talking about money and your financial future, it’s important to check that the person you are working with is actually qualified to provide financial advice. There is no harm in asking to see the financial advisors credentials, and if you like you can even check with the relevant accreditation boards to confirm their certification.
It’s important to keep in mind that while accreditation is a great sign, it is not a guarantee of a great financial advisor, you will still want to ask for references and referrals. See ours here.
There are also great benefits in working with a financial planner that is also a qualified CPA accountant as they can assist with a more holistic strategy for managing and growing your wealth.
Consider the Pay Structure
Every financial planner has their own pay structure and the one you choose will determine how smart an investment they truly were. In general, you’ll want to avoid financial planners that work on a commission. While it may seem like a win-win situation, they are more likely to have the final pay off in mind instead of meeting your needs.
This means you are more likely to be pushed into altruistic, high-risk high-reward situations, rather than focusing on the necessary steps to help you meet your goal.
Listen for the Questions
You can learn a lot about the ethics of a financial planner simply by listening to them speak, but one of the biggest giveaways is the number of questions they ask. Since everyone’s goals and financial situation is different, there is no one size fits all option. It’s wise to run away from anyone that claims there is one.
Instead, a financial planner should ask a number of questions to help ensure they understand the full scope of your situation so they can make an adequate plan from there.
Beware of Bragging
Some financial planners love to brag about market-beating results. Unfortunately, these boastful statements are often far from the truth. Financial icon Warren Buffet was a market-beating decision maker, and he was one of the very few. Which makes it safe to say if you are sitting down to a standard interview with a financial planner they aren’t on the level as Mr.Buffet.
So if your financial planner is making claims that you know are inadequate, time to move on to the next candidate. The last thing you need is false promises in your corner.
Run a Background Check
There will need to be a fair amount of transparency and trust to have a successful relationship with your financial planner, so you will want to know a little bit about their background. Don’t be afraid to ask if they have ever been convicted for a crime or if they were ever put under investigation by an investment industry group.
Even if the answer is no, do your homework. Run a background check or be insistent that they provide references with a similar goal structure to yours.
Look for a Fiduciary
A fiduciary is more or less a pledge that your financial planner makes stating that all of their actions will be in the best interest of their client. There are those who aren’t fiduciaries, and you’ll typically find that they adhere to a slightly lower moral standard.
For this reason, it’s best to know their code of ethics ahead of time so you know what to expect over the course of your working relationship. It’s more than fair to consider it a hard no if a potential financial planner is not a fiduciary.
Trust Your Gut
At the end of the day, it’s important to trust your gut. You’re hiring a financial planner that will be helping you handle your life savings, and there’s no feeling worse than knowing you ignored your instinct and lost money as a result.
If something doesn’t feel right, don’t hire them. If you’re not sure, continue to contact references until you have a clearer idea about what your planner is about.
Finding the Right Financial Planner
Hiring a financial planner is an exciting and important first step towards creating a financial situation that fits you. Which is why it’s so important to find someone you trust to help you plan your future.
If you don’t know where to start, you can always try a quick financial health check to determine if you need a financial planner and which kind would be best for you.