Building the Ideal Financial Planner

We spend a lot of our life in pursuit of perfection. We know that practically speaking, perfection is unattainable, but keeping our dreams in mind is a crucial guide. Whether thinking about our health, family, home, job, vacation, or car – we know what our ideal is and we make plans and take action to get as close to our perfect life as possible. Are you thinking the same way about your financial plan? First, you’ll need the perfect financial planner. What would that look like? Let’s look at building the ideal financial planner.

1. Know Where to Look

I always recommend starting this search by asking family and friends, who have similar finances and lifestyles to your own, for referrals. Asking some professionals whom you trust, like your attorney or CPA, is also helpful. It’s often in their interest to know trusted financial planners. This process should get you started with a list of names who have earned the trust of others. With list in hand, you can begin your own research with a simple Google search to explore their individual websites. Industry sites are also enormously helpful. The Financial Planning Association (www.fpanet.org) or the Certified Financial Planner Board (www.cfp.net) websites are great resources that contain a great deal of valuable information. The CFP Board sets and enforces the requirements for CFP certification, so consulting their site will help you determine if the adviser you’re considering is in good standing. You may also want to check regulatory backgrounds with The U. S. Securities and Exchange Commission’s Investment Adviser Public Disclosure website and the Financial Industry Regulatory Authority Broker Check website.

2. Verify Credentials

Asking about licenses and certifications gives you a good idea of a planner’s background and motivations. Seeing the initials CFP by their name could be a start. A CERTIFIED FINANCIAL PLANNER™ professional is held to industry standards of education, examination, experience, and ethics. To supplement that certificate, you should be encouraged if you know that the professional is an Investment Adviser Representative (IAR) of a Registered Investment Adviser (RIA). This means that the professional is a financial planner who is held to a fiduciary standard, advising and acting in your very best interest.

3. Provides Necessary Services

You need to make sure that your prospective planner’s firm is well-versed in financial planning and offers financial planning as part of their regular business practice. There’s a difference between financial planning and management and basic financial advice. There are some brokerage firms in which financial planning is mostly incidental to the actions they take with your money. You want an organization that specializes in client-oriented financial planning.

4. Compensation Structure

It is important to understand how you pay your financial adviser, and how they may be incentivized. For financial planning and advice, advisers are paid in a fee-based compensation structure – it might be a standalone fee, an asset management fee that’s based on a percentage of total assets being handled, or a fixed retainer fee. If you feel uneasy about commission-based compensatory structures, as they may create a misalignment of interests, avoid purchasing proprietary products.

5. Handles a Client Profile Similar to Your Situation

This might seem intuitive, but many financial planning professionals are very specialized. It makes sense to work with an adviser who works regularly with clients like you. They understand strategies that best fit you and your money and they can better anticipate the challenges and issues you will face moving into the future – because they’ve seen it all before.

6. Frequent Communicator

The ideal financial adviser isn’t just there to help you devise a plan, but there to help with the plan’s implementation, and provide guidance in the long-term to keep you on track. To really achieve this level of care, your adviser should be in regular communication, updating you on your status, discussing any necessary adjustments to your plan, if there have been any significant changes, if you need to take corrective action and get back on track. If you haven’t found an adviser who will provide you with this level of detail and guidance, and maintain frequent communication, then you probably haven’t found the right adviser for you.

7. Make Sure their Style is a Fit

Every adviser will be different, have their own approach, and a style that sets them apart – for better or worse. You need to ask pointed questions that get to the bottom of how they approach their planning. Ask directly – what makes you different, why should I work with you? If you’re comfortable with the answers, the relationship should be productive for the long-term.

8. There Needs to be Genuine Interest

Avoid the sales pitch. If during your first meeting there hasn’t been an open dialogue about your situation, your goals and aspirations, and a vision of your financial future, that should be a red flag. The ideal financial planner should be genuinely interested in getting to know you. This interest is an indicator that this adviser is trustworthy and may more likely act in your best interest. Upon this trust, you can begin to establish a long-term relationship, and you may have finally found the  financial planner right for you.

The ideal financial planner isn’t just a shepherd for an already healthy retirement situation. The right advice can help get anyone on-track toward financial independence. The first step to help securing your future and partnering with that ideal adviser is knowing what you’re doing well and how you need to improve. My Retirement Quiz can help clarify your situation.