Hiring a financial planner is an incredibly personal – and important – decision. This is someone who will be perusing the intimate details of your financial life, and could potentially hold your future retirement success in their hands. Most experts agree that anyone would benefit from working with a financial planner, no matter their level of income. 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:
1. DO YOU HAVE EXPERIENCE WORKING WITH OTHERS IN MY LIFE SITUATION?
Your financial planner isn’t there to judge you, their job is to help you make the best of any financial situation. This could mean helping you bail out from a bankruptcy, developing a new 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 MONEY, AND HOW IS IT GROWING?
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 account. 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 growth may help you determine whether or not they would be a good fit for your long-term goals.
3. ARE YOU A FULL-TIME FIDUCIARY?
A fiduciary agreement, also known as being held to a fiduciary standard, means that your financial planner is required to place your interests above their own — even when it means they make less money on a trade or sale. A fiduciary advisor is one that acts with UNDIVIDED loyalty to the client and the clients best interest. If an advisor is not a Fiduciary they are what is called a Suitability Advisor. A Suitability Advisor is not required to make decisions based on the best interest of the client, only what is a “suitable” investment. This difference can mean a large proportion of missed returns for a client.
4. HOW ARE YOU COMPENSATED FOR HELPING ME?
Financial planners are often making money from a variety of sources: direct hourly or flat-fee payments from clients for managing financial interests and a percentage or fee for trades. It’s important to know exactly how your advisor is compensated before you make a final decision, but it’s important to remember that you often get what you pay for!
5. TELL ME ABOUT A CLIENT’S SUCCESS (AND A 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 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.