Financial planning has become ever more complicated since the advent of electronic tools to monitor and analyze numbers and charts. While having a computer certainly makes it easier to get accurate answers to math problems, it doesn’t necessarily make the average person better able to evaluate their own financial needs. But how can the average person decide who are and aren’t competent financial planners?
The title of Certified Financial Planner is available to professionals who complete a rigorous educational curriculum and pass a standardized battery of tests. Individual investors should also consider whether their candidate has other common certifications like those awarded to Certified Public Accountants or the Series Seven, Series 24 and Series 63 examination certificates administered by the Financial Industry Regulatory Authority.
In many states, some form of certification is required before an individual can advise the general public on investments. Most financial planners work within the framework of a bank or brokerage firm as well, which gives them access to facilities for trading, account management and industry oversight.
While it isn’t automatically inadvisable to work with a new financial planner, it is important to recognize having experience with situations similar to your own can be a major advantage, especially if your situation is time-sensitive. When interviewing potential candidates, make sure your questions include all of your assets and your plans for your future management of those assets. Also be proactive about asking your candidate for referrals if they don’t feel they have the knowledge or experience to handle your particular set of circumstances.
While it might seem counter-intuitive to hire a professional advisor on an open-ended hourly basis, there is a very good reason for avoiding a financial planner who is paid on a commission basis. Many industry professionals find themselves pressured to offer and promote certain products because the companies offering them give those professionals preferred compensation if they are able to steer their clients to them. This isn’t good practice for a variety of reasons. Always look for a planner who will work on a flat hourly rate so they have the freedom to recommend the right investments and strategies.
When you contract with any financial professional, look for the word “fiduciary” in your agreement paperwork. This word has profound legal and ethical meaning within the industry and like an attorney violating privilege, a financial planner violating their fiduciary responsibility can be very serious breach of ethics. The relationship is meant to protect the client and their estate, so make sure you take full advantage of your rights as an investor.
For someone new to the business, hiring an investment professional may seem like a complicated and difficult process. Ultimately, however, it is in your best interests and in the best interests of your estate that you get the right person to help. Over the years, your portfolio will likely experience far greater gains if you have the right advice at the right times. A Certified Financial Planner can go a long way towards making sure you have everything you need to succeed.