Seeking out a financial planner can be a daunting task. Who do I talk to? What questions do I ask? How much should I pay? What services should I receive? These are all important considerations when looking to hire a financial planner. Additionally, nearly anyone can call themselves a financial planner which is why it’s important to differentiate between the planners who are out to make a buck, and the financial planner who truly wants to bring value to your unique situation, in an objective way.
First, it’s important to do your due diligence. Review your prospective advisor’s educational background and professional experience to learn why that particular planner may be positioned to help you with your financial situation. What sets them apart from the others? An advisor’s website can be a good starting point to learn more about their qualification and services offered. You can get additional information on independent advisors registered with their states or the U.S. Securities and Exchange Commission (SEC), as well as advisors associated with a brokerage firm, at Broker Check, a free tool from FINRA.
When prospecting for planners, it’s important to review and understand a planner’s certifications. For example, the Certified Financial Planner designation (CFP®) is considered the gold standard in financial planning circles. To get the CFP® designation, planners must take extensive, specialized coursework, pass a rigorous exam, and accrue three years of relevant experience. Every two years, certificants must complete at least 30 hours of continuing education. Other common designations include Certified Public Accountant (CPA) and Enrolled Agent (EA), for planners that may specialize in accounting and taxes, Chartered Financial Analyst (CFA), for advisors that specialize in portfolio management and investing, and the Accredited Financial Counselor (AFC®), for advisors who may focus on financial coaching and counseling.
It’s important to understand the level of service you’re receiving. We believe it’s important to work with a CFP® as they should be taking a holistic approach when creating a financial plan and wealth roadmap. Not only should they help with investments, but additionally, they should be taking tax efficiencies, insurance needs, income planning, estate planning, retirement planning, and general planning needs into consideration when planning for your future.
Now that we know who you should be working with, how can we expect to be charged for their services? Typically, advisors are paid through client fees (“fee-only”), commissions, or a combination of both (“fee-based”). In our opinion, it’s important to work with a “fee-only” planner. This helps ensure the advisor is acting in a capacity that best suits your needs. If a planner is not independent and pushes products for a company, via commissions, the water becomes murky as the advisor is now incentivized to sell you a specific product versus doing what’s best for your situation. An advisor that is fee-only may charge a percentage of assets under management which could be a better fit as now the financial planner is incentivized to do what’s in your best interest. It doesn’t matter what strategies they implement as they will get paid the same. Versus an advisor who pushes commissionable products could be encouraged to sell one product over another as it pays a higher commission.
Lastly, it’s important to understand the level of care you will be receiving. Some advisors have an initial upfront meeting and then check-in with clients once a year, while other advisors provide ongoing support throughout the year to help with the implementation of a plan and coordination with other service providers, such as insurance agents, mortgage brokers, and accountants. We think it’s important to find what works best for you and your situation. Everyone is different. Some clients like to be more hands on and want to have an advisor who is readily accessible, while others want to take a hands-off approach. In the end, it’s important to find what works best for you and your financial situation.
It’s important to make sure you have a team of fiduciaries working for you to help with any planning needs. If you or a family member you know is looking for additional insight into hiring a financial planner, please don’t hesitate to reach out to our team at Aspire Wealth Advisory.
Ben Webster, CFP® and Derek Prusa, CFA, CFP®
Co-Founders and Owners of Aspire Wealth
April 2021 Newsletter
