On TV, advertisements for financial planners are as commonplace as ads for used-car dealers.
You may know deep in your bones that you need to get your financial house in order and plan for the future. But when you see those ads, you also may have the nagging suspicion that you’ll end up with a financial planner who sells you a lemon.
It’s good to be skeptical about financial planners. They may talk a good game about supporting your hopes and dreams. But many of them are simply salespeople who earn commission fees by selling investment products and insurance that you might not need and could even be harmful to your finances.
How do you find a financial planner you can trust? How do you find one who will help identify your long-term goals, analyze your current situation, and make prudent recommendations? How do you find one whose mission is to support you, not some faceless corporation?
To answer those questions, we interviewed financial planner Susan John, chair of the National Association of Personal Financial Advisors, the country’s leading professional association of Fee-Only financial advisors.
Q. If you’re looking for a financial planner, what’s the single most important thing you should do?
A. The number-one thing is to look for somebody who’s going to charge you a fee for service so they’re that at the same side of the table for you. If you go to somebody that’s being paid from product sales, you never know if they’re making the right recommendation for you or just a recommendation that’s going to put more money in their pocket.
Q. What are the next-most important things you should do?
A. The number-two thing is to look for somebody who has clients like you. It might sound exciting to have Goldie Hawn’s financial advisor, but if you’re not just like Goldie Hawn, probably you’re not going to get the same level of service. So find somebody who has clients that look like you.
The third most important thing is know why you’re going to see somebody. What are the questions that you would like to have answered? Everybody wants to have a successful relationship. The advisor wants to provide good advice and the client wants to receive good advice. So be very specific about the reasons why you’re there. Sometimes it might be just a little checkup to see if you’re on the right track. If you don’t know what track you want to be on, first do a little homework. Identify what’s important to you and put together the questions that you’d like to have answered.
Q. Is it a good idea to meet with several financial planners before choosing one?
A. It’s very important to find the right person. So I think you should visit at least two financial planners before you make a decision. Three is even better. You should have some rapport with the person who’s providing answers about your finances. You want to have somebody who speaks at your level, listens to you, and doesn’t rush you through this whole process. So you might have to visit a few people before you find the right person.
Q. How much does it cost to hire a fee-only financial planner?
A. The typical hourly rate varies, depending on where you live. Obviously, a planner who works in a high-rise office in a big metropolitan area is paying a higher rent than somebody who’s out in the country like me. So their hourly fee is going to be higher. It also depends on how efficient they are with their time. When you’re paying an hourly rate for someone to help, you want to be sure they’re giving you a good hour. So it can range anywhere from $150 to $500 an hour. But there are many people who would charge less. It depends on the level of complexity of the questions that you’re asking.
Q. What if you’re in a special situation, such as going through a divorce?
A. If you’re going through a divorce, you would be better advised looking for someone who handles somebody in a divorce situation. They might even be able to give you some great tips that would save you some money in the divorce without making any waves in the process. Divorce attorneys don’t always know that much about finances.
Q. At what age should people consider hiring a financial planner?
A. In my opinion, it’s never too early. I don’t think you can be too young because the sooner you start learning about money, the more likely you are to actually have some. One little tip just might make all the difference in your financial future. If you’re like most of us, your parents probably taught you even less about money than they taught you about sex. Many of our clients have sent in their children or grandchildren for a consultation when they graduate from college, are planning to get married or getting ready for their first child.
Q. How many visits does it take to get a financial house in order?
A. It depends on what level of service you need. We have a number of clients we see only once a year. After we develop a plan for them, they check in once a year to assess their progress. Or they can call us anytime they have a question about something, such as what to do when the stock market goes crazy. Then we have other clients with whom we have had more in-depth relationships where we manage their money and even more than that sometimes. But that would be unusual.
The National Association of Personal Financial Advisors represents about 2,600 fee-only financial planners nationwide and offers comprehensive online checklists and tools to help people identify their financial goals and find a planner who suits their needs. For more information, contact http://www.napfa.org/
Another good resource is the Financial Planning Association, which represents about 12,000 fee-only and commission-based financial planners. For more information, contact http://www.fpanet.org/
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