How to Choose a Financial Planner

This article is a reprint from the Financial Planning Association.

Whether stung by a declining stock market, facing a financial crisis in your life or just wanting to organize your financial affairs, you may have decided you want professional financial planning advice. But how do you find the financial planner who is right for you? Here are several tips from the Financial Planning Association:

Trust is key. Choosing a financial planner is as important as choosing a doctor or lawyer. Money is one of the most intimate aspects of our lives, and, consequently, working with a financial planner is a deeply personal relationship. As you go through the process of finding and selecting a planner, keep in mind that trust and comfort will be key factors.

What do you want a planner to do for you? Before you start your search, think about why you want a financial planner. Do you want advice about investments, retirement planning, an inheritance, a small business, saving for college, a financial crisis such as a divorce or aging parents, or are you looking for a general financial overhaul? Some planners will be especially strong in one or more of these areas.

Be clear that you are hiring a true planner. Many financial professionals call themselves planners, but in reality their knowledge and focus are limited to a single area, such as selling stocks or annuities, or doing taxes. A financial planner should be educated and trained to address a wide variety of financial issues. Even if your concern is a specific issue, planning should be done in the context of your overall financial situation.

Start gathering names. Collect names and information about planners from friends and family, work colleagues and recommendations from other financial professionals such as your attorney or accountant. The Financial Planning Association also can provide names of planners in your area or by specialty through Planner Search, a referral service. You can reach Planner Search via the Internet at www.fpanet.org, by calling (800) 647-6340, e-mailing supportcenter@fpanet.org, or writing to National Financial Planning Support Center, 5775 Glenridge Dr. NE, Suite B300, Atlanta, GA 30328.

Start screening. From your initial list of names, call for preliminary information. You may find out right away, for example, that a particular planner requires a minimum net worth that you don't meet. Many planners will have a brochure outlining their services and background, but you'll want to dig deeper than that. Ask for their ADV Form, Parts I and II. The Securities and Exchange Commission requires Form ADV for anyone who is a registered investment adviser (RIA), and anyone calling themselves a financial planner should be an RIA. Part I shows any disciplinary history. Check with the local Better Business Bureau and the Certified Financial Planner Board of Standards (303/830-7500) for disciplinary problems.

Determine how they charge. Financial planners charge for their services in a variety of ways: by the hour, by a percentage of your assets "under management," by commissions of the products they sell, or a combination. Be clear about how they charge and what services they charge for.

Narrow down possibilities. The initial call and literature should help you identify the best candidates. What is their client base—do they work primarily with high income or middle-income clients? Do they have a specialty that matches your needs? Do they serve a lot of business owners, retirees or executives? Are they particularly familiar with stock options?

Check qualifications. What financial planning and other financial designations do they hold? What is their educational background and work experience? Are they licensed to sell certain products, such as securities or life insurance? What professional affiliations do they have, such as the Financial Planning Association, which would imply they are keeping up with the ever-changing field of financial planning? What business arrangements do they have that might present a conflict of interest?

Meet in person. Much of the above information you can gather from your referral source, the initial phone call and the literature. But ultimately, you'll want to narrow your list of candidates to three to five planners and interview them in person. This interview should clarify questions you still have, but more importantly, go to the heart of your initial concern: Do you have a sense of trust and rapport with the planner? Is the person forthright in his or her answers? Do they seem focused on your needs, rather than selling products?