As the volume of baby boomers entering retirement age increases, the financial planning profession is exploding with more and more “planning professionals” entering the field each day. This increase of professionals providing financial planning services has led to confusion among consumers in evaluating and selecting a suitable financial planner. There are quite a few factors to consider when seeking a trustworthy, qualified financial planner.
Since the financial planning profession is not regulated by any federal or state agencies, the planner’s credentials are very important. While advisors may have various collegiate degrees and financial certifications, the CERTIFIED FINANCIAL PLANNING™ designation is specific to the financial planning field. It requires the passing of a rigorous, 10-hour examination as well as on-going, continuing education requirements by certificate holders. While collegiate degrees and financial certifications are certainly respectable, utilizing a financial planner with this specific designation truly aligns their certification with your needs.
Next, a seasoned financial planner should have a vast amount of experience and resources in dealing with an assortment of complex financial issues that will translate over into your unique situation. While it is impossible to be an expert in every specific subject area, experience coupled with a team of subject matter experts strengthens the financial planner’s understanding of the “what ifs/then what’s” and the subsequent translation of such to your circumstances. Keep in mind, the financial planner’s professional experience should be outlined in disclosures (provided up front and with ease) which should also include information on the planner’s credentials, conflicts of interest, compensation, etc.
The financial planner’s approach to your financial needs should be comprehensive in nature. Your entire financial situation should be considered and evaluated, not just one or two specific areas. From cash flow, investment account structure and overall asset allocation to social security eligibility/benefits, life insurance coverage and your estate plan, reviewing your entire financial situation from top to bottom will ensure all recommendations are as accurate and appropriate as possible.
A deep understanding of your value and belief system is yet another critical attribute your financial planner should possess. Your planner should “look beyond the numbers” and understand that, while in some cases, strategies look the best on paper or in theory, your values and beliefs are the true “trump” cards. For example, while current mortgage rates are extremely low and the mortgage interest deductibility beneficial, your financial resources may allow you to pay your mortgage off, thus allowing you to sleep better at night knowing your home is free and clear. The financial planner must accommodate this value to his/her strategies and translate such into your desired financial goal. This understanding of your values and beliefs will ensure your goals are addressed in a complete and achievable fashion.
Your financial planner should have a structured approach in which a clearly defined, step-by-step process supported by a financial planning engagement agreement is utilized to maximize efficiency and effectiveness. Not only does maintaining such structure ensure that both parties understand their roles and responsibilities but it also ensures accountability for the completion of necessary tasks along the way, which in turn keeps the financial planning process moving along without interruption.
Finally, it must be understood that the financial planning proposition is a process, not a “product.” Many planning arrangements are “product-driven,” in which an advisor is focused on selling a product versus identifying and delivering solutions. The integrity of the planning process is maximized when your interests are the first priority. The vast majority of dialogue should be focused on your goals, your concerns, your values, your asset base, etc. After all, it is truly all about serving your needs and maximizing the probability of success in achieving your established financial goals.
These are just a few of the many factors you should consider when engaging a financial planner. Navigating through the financial waters is challenging and seems to get more and more difficult each day. However, utilizing a well-credentialed, knowledgeable financial planner whose process and team puts your needs and goals first can certainly go a long way in allowing you to sail a bit more smoothly through the choppy waters.