Choosing a Financial Planner

Planning for a secure financial future is not an easy task to tackle alone. On the one side are all the factors that need to be considered: budgeting, cash flow management, retirement, funding for a college education. On the other side are the range of options: money markets, CDs, stocks, bonds, mutual funds and 401(k)s. Fortunately, assistance is available to help weave you through all the alternatives to create a plan that works for you.

The role of a financial planner is to help you define your financial goals and to assist you in implementing a plan to accomplish those goals. But, a good financial planner should have more than just technical knowledge, he or she also needs to be a good listener and someone who is willing to focus on what's important to you and what kind of life you want to lead.

The first step in finding a financial planner is to obtain a list of local planners. The Better Business Bureau suggests getting referrals from friends, relatives or colleagues. Another excellent source is your certified public accountant (CPA). Over the last several years, many CPAs have extended their traditional tax services to include financial planning.

"CPAs are already familiar with a client's tax situation," notes Brian W. Hanse, CPA, MBA, a law partner at Hanse & Hanse in Wayne. "Financial planning involves many of the analytical tasks that come naturally to those trained as accountants. CPAs, especially those with audit backgrounds, are used to asking the right questions. In many cases, a CPA/financial planner can help his or her client reach solutions to problems the client may not even have been aware of."

After developing a list of local financial planners, the next step is to set up some appointments. The Certified Financial Planner Board of Standards recommends meeting with at least three planners before making a decision. Bring to the meeting a summary of your monthly and annual income, expenses, assets and liabilities. Also, write down your financial goals and specific needs such as investment planning or college financing.

"One of the most important questions to ask when creating financial goals is, 'What am I looking for?'" says Bernard M. Kiely, CPA, CFP, MBA, president of Kiely Capital Management, Inc., in Morristown. "Ask yourself whether you need a comprehensive financial plan that incorporates investment strategies, saving for retirement, budgeting advice and estate planning. Or do you just need assistance in one particular area like managing credit card debt or insurance policy analysis? Once you have that figured out, it's much easier for you to articulate your financial needs and goals to the planner and for the planner to develop a plan that is right for you."

During the interview, ask the planner specific questions about his or her fee structure, credentials, disclosure documents, possible conflicts-of-interest and experience. It is important during the interview to determine if you are meeting with a person you feel comfortable discussing your financial matters with. Also, make the prospective planner aware of your attitude towards taking risks when it comes to investing and what your priorities are in planning for your financial future.

Financial planners are compensated in several different ways: commission only, fee and commission, fee only or fee offset. If a planner works on a commission basis that means he or she will collect a fee when you buy something based on their recommendation. Under a fee offset arrangement, a planner will charge you an up-front fee, but if you buy a recommended investment, any commission the planner earns will then be subtracted from that fee.

After determining how the planner will be compensated, consider his or her educational and professional background. A number of specialty designations exist in the financial planning profession. Look for a CPA with an additional designation as a Personal Financial Specialist (PFS) or a Certified Financial Planner (CFP). These designations tell you that the person has passed a rigorous examination and has extensive training and experience in the field. While there is no licensing requirement and very little regulation in financial planning, these designations indicate that the planner abides by a code of ethics and is committed to continuing professional education.

For more detailed information on a planner's investment philosophy, education, business background and planning services, request some form of documentation. Most planners will provide you with a standard disclosure document or a firm brochure that contains biographies, firm history and information about the types of planning they provide. This will also assist you in determining if the person has experience in the planning areas that are most important to you. Lastly, ask how long the financial planner has been doing business in this area and for the names of a few clients you can call for references.

Once you have decided upon a particular financial planner, request a written engagement letter to document the nature and scope of service the planner will provide. After you have implemented your financial plan, be sure to reassess your plan regularly with your financial planner, and make sure your planner understands your needs as they change and develop over time.

"It's not necessary to have the plan rewritten every year," says Kiely. "But let your planner know about any significant things that have happened to you that might have an impact on your financial plan."