What stops you from getting financial advice? The three barriers that I hear most are fear of the price; guilt that you should “do it yourself”; and lack of confidence in choosing a trustworthy advisor.
If you have not experienced the benefits of competent financial advice, you may have no idea what you are missing. In addition to understanding what you need to do to achieve your future goals, a comprehensive financial plan will provide you the peace-of-mind that under any conceivable situation, your family will be financially sound.
Make Family’s Financial Success a Priority
While price and guilt are real barriers to overcome, both can be resolved if you choose the financial planner that is appropriate for you. The price of the plan should reflect the complexity of your situation and the number of issues to be resolved. Choosing a planner whose services match your situation should result in a reasonable cost. To overcome your guilt for not doing your own planning, just consider all the other services where you gladly pay for someone else’s expertise. A doctor, an electrician, or even a hairstylist comes to mind. Why is something as important as your family’s financial security not worthy of getting expert advice?
Paying someone who has the educational background, the experience, and a commitment to the highest standard of care should not make you feel guilty, but rather gratified that you are making your family’s financial success a priority.
Choose Someone You Can Trust
You need to be comfortable and confident with your choice for a financial advisor. Don’t be hesitant to ask questions and conduct your own due diligence. Here are several factors to consider:Client Interest First.
You want a planner who is a fiduciary. As a fiduciary, an advisor has a legal obligation to put the client’s interest first, rather than their own. Some advisors, particularly those that work for a brokerage firm, are only required to meet a suitability standard. Under the suitability standard, the investment advice need only be considered appropriate for the client, but beyond that, a client must rely upon their own due diligence to ensure that they are receiving the best advice. Don’t be timid about asking your potential advisor which standard of care is required of them.
Education and Experience.
There are several professional designations that require a candidate to have specific levels of education and experience to qualify. For example, the Certified Financial Planner® certification requires competency in over 100 financial topics, passing a comprehensive ten-hour exam, and three years of experience. To maintain the certification, the practitioner is required to meet continuing education requirements.When interviewing the potential planner, understand their educational background and their experience level. Most financial planners began their careers in the investment, insurance, accounting, or banking industry. The background of the planner may influence their area of specialty. You want a planner with the experience that matches your needs.
Planning Process.
Determine how the planner will work with you. Ask the planner to explain the steps that he/she will use to understand your situation, provide the analysis, and make the recommendations. Ask whether a written plan is provided and the type of follow-up that you should expect.
Compensation of planner.
There are three ways that planners are compensated: fees from clients (fee-only); commissions paid by a third party (commissions only); or both fees and commissions (fee-based). During your initial contact with the planner, you should seek specific information concerning the planner's compensation structure. If the planner indicates they do not charge to do a plan, you may want to determine how comprehensive their service is and whether it will meet your needs.