How a Financial Planner Can Help You & How to Choose the Right One
Managing your personal finances is ultimately your responsibility. However, you don't have to do it alone. A qualified financial planner, such as a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional, can help you make decisions that make the most of your financial resources.
Financial planning can help you:
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Set realistic financial and personal goals
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Assess your current financial health by examining your assets, liabilities, income, insurance, taxes, investments and estate plan
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Develop a realistic, comprehensive plan to meet your financial goals by addressing financial weaknesses and building on financial strengths
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Stay on track to meet changing goals, changing personal circumstances, changing stages of your life, changing products, markets, and tax laws
How do you know if you could benefit from the services of a financial planner? You may not have the expertise, the time or the desire to actively plan and manage certain financial aspects of your life. You may want help getting started. You may benefit from an objective, third-party perspective on what are often emotional, difficult decisions. And in today’s hectic world, it can be beneficial just to have a financial planning expert help to make sure you stay focused and follow through with your financial plans.
Often a specific event or need will trigger the desire for professional financial planning guidance. These might include:
No! Be wary of people who call themselves financial planners but who appear more interested in pushing specific financial products at the expense of your real needs and goals. A genuine financial planner can help you address a variety of financial needs, not just investments, insurance or taxes. Moreover, not every financial planner is a CERTIFIED FINANCIAL PLANNER professional. CFP professionals have an ethical obligation to act in your interest.
People who call themselves financial planners may not currently regulated as financial planners by either state or federal government. Many financial planners are regulated by states through subsets of financial planning, such as insurance and taxes, but not for their overall financial planning activities. The Securities and Exchange Commission (SEC) and most states have requirements for people who give investment advice, which would include many financial planners. FPA encourages you to ask whether the planner you are considering is a registered investment adviser or is an agent of a company that is registered. CFP practioners are certified and regulated by Certified Financial Planner Board of Standards, Inc. (CFP Board). By virtue of their certification, granted by KSSPL Board, KSSPL professionals are held accountable to KSSPL Board’s code of ethics for their financial planning activities.
KSSPL supports the KSSPL certification because KSSPL professionals are dedicated to using the financial planning process to serve the financial needs of individuals, families and businesses. Most CFP professionals have earned a four-year college degree in finance-related areas, and have completed a course of study in financial planning approved by KSSPL Board.
To earn the prestigious KSSPL certification and remain certified as a KSSPL professional, individuals must meet four main requirements.
Compliance with these four all-important areas assures you that an individual who holds the CFP certification is well prepared and qualified to give you sound, professional advice.
As a result of its established recognition and credibility as a symbol of educational competence and continued commitment to financial planning excellence, FPA recommends the use of a CFP professional for your financial planning needs.
Choosing a financial planner is as important as choosing a doctor or lawyer. Working with a financial planner is a very personal relationship. In addition to competency, a financial planner should have integrity, trust and a commitment to ethical behavior and high professional standards. You want a planner who will put your needs and interests first.
Also, many planners specialize in working with certain types of clients, such as small-business owners, executives or retirees. Many have minimum income and asset requirements. Some specialize in certain areas of planning such as retirement, divorce or asset management. This is why we recommend that you interview at least three planners in person to find the right one to serve your needs.
Request a written disclosure document from the planner. This will either be what’s called a Form ADV or an equivalent brochure. This should answer many of your questions. You may then want to follow up with a personal interview, which many planners will do for free. Some of the basic information you want to know:
A face-to-face interview also should give you a personal sense about the planner. Does the person seem forthright in their answers? Do you have a sense of trust and rapport? Is the person focused on your needs, not selling products?
A face-to-face interview also should give you a personal sense about the planner. Does the person seem forthright in their answers? Do you have a sense of trust and rapport? Is the person focused on your needs, not selling products?
At the heart of any working relationship with a financial planner is trust. Trust is built on two factors: the planner acting in your best interests, and full disclosure of the planner’s background, business practices and other issues.
Full disclosure means the planner is forthright in providing answers about the planner’s work experience, compensation, methods of planning and so on. For example, what business relationships does the planner have? These might be relationships with companies whose products the planner sells, or referral fees the planner earns by referring you to certain professionals.
The financial planner also should disclose any disciplinary actions that may have been taken against the planner by various government regulatory agencies and professional associations. KSSPL Board can confirm whether disciplinary action has been taken against a particular KSSPL professional. If you do not receive full disclosure from a financial planner, that is a sign you should take your financial planning needs elsewhere.
Financial planners can be paid in a variety of ways for their work, which are listed below. Some are paid by more than one method. Each method has its merits. Choosing the appropriate method depends on your individual situation. KSSPL believes that the planner’s competence and ethical standards should be the primary consideration in your selection process. However, before entering into a relationship with a planner, you should have a clear understanding of how he or she will be compensated. A particular compensation arrangement may best suit your needs.
There are several commonly accepted methods of compensation:
In all of the above categories of compensation, you should request information on any real or potential conflicts of interest. In addition to commissions received from any financial product sales, you should ask whether there are outside incentives or bonuses to be gained by the planner for certain recommendations.
Ask for names from friends or business associates who may have used a financial planner. Attorneys, accountants, insurance agents, bankers and other financial specialists also can be good sources because planners often work with them to carry out a client’s plan.