Financial Planning: Who You Gonna Call?

January 11, 2016

Photo credit: Irina-Silayeva-iStock-Thinkstock

Previously, I wrote about Target Date Funds and Robo Advisors. These are great automated services that help you manage your investment funds. For many of us, this is all the help you need but sometimes life gets a little more complicated and you want to reach out to a real person for guidance on our financial concerns. When the numbers get tough and confusing and you want some help with your financial matters who are you going to call?

What kind of help do you need?

First of all, consider what kind of help you really need. What is the extent of the service that you are looking for? Do you want assistance picking individual investments or do you want someone to help you organize a whole portfolio. Do you just want to look at your retirement accounts or should you get guidance on all your finances from taxes to insurance, long term financial planning, and estate planning. Is this going to be a one-time look or are you thinking about finding a financial mentor who you can trust over a significant portion of your life? When we consider home improvement projects, we think about the extent of the work and decide whether to hire a contractor, engineer or architect. The same principle applies to financial improvement; think about the extent of the project and then hire the appropriate professional.

What kinds of professionals are available?

There is an alphabet soup of professional financial designations out there so deciding who you should consult is very confusing. If you are looking into retirement planning and want to get a reality check on your plans, then you should contact a Certified Retirement Counselor. These folks have been trained to assist people who are moving from the working world into retirement and can guide you through investment planning, annuities, and long term income security. If you are fortunate enough to have significant savings and investments in individual retirement plans and stocks and bonds, then a Registered Investment Advisor can help you with individual investments. In the old days, these were called stock brokers. Suppose you want to get a handle on the “big picture” and want a total make-over. A Certified Financial Planner can assist you with your personal budget; tax planning, estate planning, insurance, retirement planning, and investments. If you are primarily interested in your investments and want to maintain your wealth over the long term, then a Chartered Financial Analyst is considered the gold standard of advisors.

What questions should you ask?

This is the same as hiring any other professional service. Ask about their education, credentials, specialization, and experience. The cost of the service is important for the amount the advisor charges and the method that they get reimbursed for their service. Some advisors charge a fee for service and some are paid on a commission basis. You should know how they are compensated so you can be aware of any conflicts of interest in the advice they give you. Finally, (and this is the big question,) do they have a fiduciary responsibility for the advice they give you? A fiduciary will most likely act in your best interest. If the advisor only works to a standard of providing suitable advice, then they can put their own self-interest ahead of yours.

Where can I find a …?

Many folks are introduced to a financial professional through a friend or relative. A personal reference is a good starting point but you may also want to check the professional credential sites on the internet to find a qualified advisor in your neighborhood who offers the services you need. Information on Registered Investment Advisors can be found at government regulators or from industry self-regulators. Personal Certified Financial Planners have a professional site that helps you locate advisors and has helpful information to guide your planning experience.

Is it right for me?

At the end of the day, your preference will be based on your own need and confidence in your advisor. It has to be a good personal fit. The advisor should have the knowledge and experience you need and the ability to communicate it to you. The brightest person in the business is not much help if you don’t understand them and have confidence in their professional guidance. Finding the right fit is a personal choice and you should feel good about your choices. You want a financial advisor who you can personally relate to, otherwise you would have been happy with the automated services of a Target Date Fund or a Robo Advisor.