If you’re thinking about hiring a financial planner, I have some good news and some bad news for you.
Let’s start with the good: there’s a revolution happening in the world of financial planning right now, and it’s making a service that until recently only served the wealthy more accessible to people at all stages of life and all levels of income. More now than ever before, you have a good chance of finding a professional who can help you achieve your financial goals at a cost you can afford, no matter where you’re starting from.
But the bad news is simply that it can be hard to find those people if you don’t know where to look. And the world of financial services can be a little shady if you make a wrong turn, which could leave you with an “advisor” who doesn’t have your best interests at heart.
I want you to get the help you deserve. I want you to be able to find a professional who not only has the necessary skills and knowledge, but is excited to be helping you reach your financial goals.
So in this post, I’ll give you five questions you can ask that will help you find the right financial planner for your specific situation. If you think you might benefit from working with a professional, this is the place to start.
Do they work with people like you?
People at different stages in life have vastly different goals and different needs, which means that there’s a different type of financial planning involved at each stage.
Just think of someone fresh out of college compared to someone who’s newly retired. The financial questions they’re facing aren’t even remotely the same, and it’s doubtful that a single financial planner would handle both of their needs effectively.
So as you look for a financial planner, look for someone who is used to working with people like you. The more closely their specialty aligns with where you are in life, the more likely it is that they will be familiar with the kinds of questions you’re facing and the specific planning tactics that will help you reach your goals.
As an example, I primarily work with new parents, which ranges from someone who is planning to start a family in the near future to someone who already has a few young kids.
Other financial planners will have other focuses. Some like to work with entrepreneurs. Others specialize in working with medical professionals, or retirees, or millennials, or women or LGBT clients.
The good news for you is that more and more financial planners are recognizing the value of specializing, both for themselves and for their clients. Which means it’s very likely that you’ll be able to find someone who specializes in your situation.
If you need some help finding someone, this search tool from the XY Planning Network actually lets you search through advisors by specialty, which is pretty cool!
Are they focused on you or them?
When you talk to a prospective financial planner, remember that you’re interviewing them to make sure they are the right person for you. It’s easy to feel like it’s the other way around, but this is about YOUR life, not about how great they are.
A quick sign of a good financial planner is someone who does a lot of listening and asks a lot of questions about YOU based on what you’re telling them. Their goal should be to understand your specific goals, needs and wants, which means that you should be doing most of the talking and the planner should mostly be listening.
On the other hand, a quick sign of a bad financial planner is a conversation that revolves around them. “Let me tell you about how awesome my investment strategy is”, or “I have this great product that will solve all your problems” (cough! whole life insurance). When it becomes a conversation about them instead of you, it’s a good sign that they’re not really focused on the right priorities.
Remeber, there is never ONE solution that solves all problems. Financial planning is about building a life that makes you happy, which means that the right solution is the one that fits your needs.
What services do they offer?
Different financial planners offer different kinds of services, and it’s important to know what you’re going to get ahead of time so you can make sure it lines up with your needs.
Some will offer comprehensive planning, meaning they will help with all areas of your finances. Budgeting, debt, investments, insurance, estate planning, employee benefits, etc. They may not be an expert on every topic, but they’ll help you create a plan that includes them all.
Other planners have a bigger focus on investing. They might manage your investments for you, but may not cover some of the other topics, at least not in depth. Others may have a greater focus on taxes, or insurance, or really any other area.
It’s a good idea to first decide what kind of help you’re looking for, and then find a financial planner that offers those services. That way you make sure you get everything you want but don’t end up paying for something you don’t need.
How are they paid?
It may seem kind of trivial at first, but how your financial planner gets paid can have a big impact on the kinds of recommendations they make, which of course have a big impact on the success (or not) of your financial plan.
Some financial planners get paid a commission to sell certain types of products, such as mutual funds or insurance. Not all products pay a commission, so these types of planners are going to be limited in what they can recommend.
Other financial planners are what’s called fee-only, which just means that 100% of their pay comes directly from their clients. With no incentive to sell any specific product, they have a little more freedom to make recommendations based on what’s best for the client rather than what pays the best commission.
Finally, there are fee-based advisors, which are really a combination of the two. They charge clients a fee and make commissions from the products they sell.
Now I’ll be up-front about this: I’m a fee-only financial planner so I clearly have some kind of bias on this topic. But I chose that path because I truly believe that it’s the best way to align the planner’s interests with the client’s interests, which leads to better outcomes for everyone.
For more information about how advisors are paid and why it matters, you can check out this post: Why Should I Hire a Fee-Only Financial Advisor?.
Do you trust them?
Hiring a financial planner is a big deal. After all, you’re trusting someone to help you achieve some of your most personal goals. It’s not a decision that should be made lightly.
The key word in that paragraph above is “trust”. Above all, you have to trust that this person not only has your best interests at heart, but has the knowledge and skill to help you make the best decisions possible.
And the truth is that this can be a hard thing to figure out ahead of time. There’s no way to know for sure, but there are some things you can do to get a better idea.
One is to see if they’ve published any articles, videos, books, blog posts or anything else where you can get a feel for their personality and how they think. If you agree with the thoughts and recommendations they put out for the public to see, there’s a better chance that you’ll agree with the specific recommendations they make for you.
You could also run a background check using something like FINRA’s BrokerCheck or the SEC’s adviser search. These tools can alert you to any past transgressions and also give you more detail about their practice.
Beyond that, I would rely heavily on the feeling you get from your personal interaction with them. Do they listen to you? Do you feel like the understand you? Did their initial ideas make sense to you?
Trust your gut here. If you’re talking to someone and it doesn’t feel quite right, there’s probably a good reason for that even if you can’t clearly define why. And if it just seems to click with another person, there’s probably a good reason for that too, as long as all the other stuff we talked about checks out too.
No matter what, don’t feel rushed into making a decision or signing on with someone unless you feel 100% that they are the right person for your needs. This is YOUR life we’re talking about here, so make whatever decision feels right to you.