Hiring a fee-only financial planner is an incredibly personal - and important - life-changing decision. Make sure you work with a Certified Financial Planner (CFP®). This is someone who will be analyzing the intimate details of your financial life, and could potentially hold your future retirement success in their hands. Most experts agree that anyone, no matter their income level or net-worth, would benefit from working with a financial planner as opposed to doing it yourself (DIY). However, not all financial planners will be a good fit for you. Before you start working with a financial professional, it's a good idea to ask them these five questions (at a bare minimum):
1. Do you have experience working with others in my life situation?
Your financial planner isn't there to judge you, their mission is to help you make the best of any financial situation. This could mean helping you bail out from a bankruptcy, developing a new financial and estate plan now that you are divorced, or figuring out how to retire early. Finding a financial professional that has experience working with other clients similar to you, with a comparable attitude towards risk and similar needs, is a good first step.
2. How do you invest your own money and do you eat your own cooking?
The best option is to learn from an individual who has already proven their chops on their own money before they decide to test out their theories on your retirement portfolio. Far from being rude, your financial planner is likely to expect this question and probably has an answer ready to share. Hearing their strategy for managing money (and most importantly, managing risk) may help you determine whether or not they would be a good fit for your long-term goals.
3. Are you willing to sign binding fiduciary and non-disclosure agreements?
A fiduciary agreement, also known as being held to a fiduciary standard means that your financial planning professional, as a fiduciary, is required to place your interests above their own -- even when it means they will end up making less money as a result.
Non-disclosure agreements are especially important for high net worth individuals, as this reinforces the standards of privacy required for anyone handling your personal and financial information.
4. How are you compensated for helping me?
Financial planners often make money from a variety of sources: direct hourly or flat-fee payments from clients for managing financial interests and a percentage for managing assets or commissions for selling annuities and life insurance. It's important to know exactly how your advisor is compensated before you make a final decision. You need to understand upfront if they will put your interests ahead of theirs at all times or if they have any potential compensation conflicts of interests (i.e., earning a commission by selling you an annuity or life insurance product).
5. Please tell me about a client success story (and failure).
While most professionals are interested in telling you about fantastic success stories, understanding where something went wrong is just as important to future learnings. Having a candid discussion up-front about how things can go wrong or what helps them go right is an important conversation and will also help you determine if you can trust the advisor.
Most people find working with a certified financial planner to shed light on many financial factors they had not considered. You may learn more about financial principles and ways to improve your family fortune – or simply get a plan in place that leaves you feeling more comfortable about your future.
If you have any questions, comments, or concerns about working with a Fee-Only Certified Financial Planner, I’d be happy to discuss them with you. I’m simply an email or phone call away and can be reached at email@example.com or 330-836-7000. You can also schedule an appointment with us by clicking here.
Many happy returns on life,
Jonathan Torrens CFP®
President and Chief Investment Officer
TCM Wealth Advisors
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.