Most financial planners can answer specific questions about your personal finances, organize and orient your overall financial picture, establish budget realities and provide tips to reduce spending, assess your retirement savings, check that you have the necessary insurance coverage, and make specific stock or mutual fund recommendations. However, like your financial plan, the correct financial planner for you is also determined by your financial situation. Consider the following:
- How much money do you have?
- How complex are your finances?
- What level of expertise do you have in money matters?
- What financial questions do you want answered?
- What do you expect a financial planner to do for you?
Knowing what you want from a financial planner can help you when interviewing multiple planners. This relates to determining your specific financial goals such as saving for retirement or your children’s education. For you to say that you want more than a 10% return on your investments is not a goal. Ideally, you are looking for a financial professional who has experience in the same areas as your goals. For basic guidance on 401(k) options or home mortgages, a smaller office may be in line with these needs. Those with higher net worth should look for a firm with experts in taxes, insurance, investments and trusts.
When looking for a financial planner, ask for referrals. Ask your banker, accountant or attorney for the names of financial planners they trust or work with closely. You can also ask your friends, family or colleagues with similar financial situations for their recommendations. Interview multiple planners and have each outline the services they offer; their education, experience and specialties, and their methods of communicating with clients. You want to choose someone with whom you feel comfortable discussing your finances.
Financial Planning Designations
A professional planner’s education and designations can often look like alphabet soup. Some widely recognized designations for financial planners are CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant, Chartered Financial Analyst, Registered Investment Adviser and Personal Financial Specialist.
A CERTIFIED FINANCIAL PLANNER™ or CFP® professional must pass a two-day, ten-hour exam covering investment management, employee benefits, insurance, taxes, retirement and estate planning. The emphasis of the educational program is the interrelationship of the financial areas, and the need for an objective analysis of a client’s circumstances and goals. A CFP® professional must also have at least three years of personal financial planning experience and meet educational and ethical standards to maintain the right to use the CFP® mark. CFP® professionals must complete 30 hours of continuing education every two years.
A Chartered Financial Consultant (ChFC) will have a background in the insurance industry in addition to having passed an examination on the fundamentals of financial planning, including income tax, insurance, investment and estate planning. The ChFC program builds on that knowledge with advanced coverage of estate, retirement, and financial planning applications. Individuals who hold the ChFC designation must complete 30 hours of continuing education every two years.
The Chartered Financial Analyst® (CFA) designation is awarded by the CFA® Institute to experienced financial analysts who successfully pass three examinations covering economics, financial accounting, portfolio management, securities analysis and ethics. A CFA charterholder must have an undergraduate degree and at least four years of acceptable professional work experience involving investment decision-making.
A Registered Investment Adviser (RIA) is registered with and regulated by the Security and Exchange Commission. This designation is essential if the planner’s firm will manage a client’s portfolio of securities.
The Personal Financial Specialist (PFS) credential is granted exclusively to Certified Public Accountants (C.P.A.) with considerable personal financial planning experience. The C.P.A./P.F.S. designation is authorized by the American Institute of Certified Public Accountants (AICPA), and can only be acquired by C.P.A.s who are AICPA members, have at least three years of experience in financial planning and pass a comprehensive and rigorous personal financial planning exam.
What Questions Should I Ask When Interviewing Planners?
Designations indicate that the individual has passed rigorous exams and adhere to ethical standards; however, there are other key areas you should look at, such as experience, affiliations and investment philosophy. When interviewing financial planners, you may want to ask the following questions:
- How long have you been doing financial planning and working directly with clients?
- What credentials do you have?
- Who are your typical clients and/or areas of specialization?
- Will I be working directly with you, or with other assistants in the firm?
- May I see examples of plans that you have developed for others?
- Will other professionals, such as accountants and attorneys help prepare my plan? If so, who are they?
- Do you do your own research?
- How do you keep your clients posted on financial information that is important to them?
- Do you have follow-up reviews?
- What is your approach to financial planning?
- Will you implement the plan, or will you refer me to others for implementation?
- Can you provide me with a disclosure statement detailing your compensation methods, conflicts of interest, business affiliations and personal qualifications?
- Will you give me a written advisory contract or engagement letter documenting the nature and scope of services you will be providing, including how much they will cost?
While interviewing multiple financial planners will take time, it is important to remember that this will be the person you trust with your financial life. If you do not understand their answers to these questions, tell them so. A good adviser will take the time to explain what you need to understand to make an informed decision.
If you would like to speak with one of the financial planners at Henssler Financial, please contact us at 770-429-9166 or [email protected].