People seek professional financial help for a variety of reasons, which might include starting a new business, earning more income, investing for the first time, or getting married or divorced. Those interested in investment management, estate planning, retirement planning or saving for a child's education are also good candidates for professional financial advice.
More than 75,000 certified financial planners are in business in the United States, according to the CFP Board. Narrowing down the selection to find the best wealth management professional for your needs is a difficult process, but it can be easier if you're aware of what qualities you should look for in a financial advisor and what it means to be certified. Here's information that will help you make the right choice.
Learn: How to Pay Off Debt While Paying a Financial Advisor
CFP: The Industry Standard
For a financial planner to become certified, he must fulfill the requirements of the CFP Board, a 501(c)(3) nonprofit that sets standards for the financial services industry. These requirements are based on the four Es: education, examination, experience and ethics. Once a financial planner fulfills these requirements, he's authorized to use the trademarked CFP certification and its logo in the U.S.
If you're looking for a financial planner, check for the CFP certification logo -- but don't stop there.
Conduct Research
To verify if a planner currently meets CFP Board requirements, enter his basic information into the CFP Board online form and the results will tell you whether he's currently certified, was certified at one point but is no longer, has been disciplined by the CFP Board or has had a bankruptcy filing within the last year.
Find Out: What's the Difference Between a Certified Financial Planner and a Financial Advisor?
Questions to Ask Financial Planners
The CFP Board recommends asking a financial potential planner 11 questions prior to hiring:
What is your experience? All CFPs are required to have several years' experience. Ask how the planner's experience relates to his or her current practice.
What are your qualifications? Ask a potential CFP about his credentials and how he stays up to date with changes in the field.
What are the services that you offer? Financial planners can't sell insurance or securities like stocks without proper licenses. They also can't give investment advice unless they are registered with the appropriate authorities.
How do you approach financial planning? Make sure the planner's investment philosophy isn't too aggressive or too conservative for your agenda and needs.
Who are your clients? Some planners require clients to have a minimum net worth. Others require certain assets. Find out what type of people the planner works with to ensure you fall into that category.
Will I be dealing only with you? Some financial planners handle all clients directly and others work with a team. If there's a team -- which might include tax professionals or attorneys -- ask to meet them.
How do you prefer to be paid? Planners can collect commission, fees or both. Make sure payment procedures are written into the agreement.
What do you charge? Prices vary depending on your situation and your needs, but the planner should give a clear estimate of hourly rates, flat fees or a commission percentage.
Who else benefits from your financial advice? Ask for a written list of potential conflicts of interest. CFP professionals are governed by a strict code of conduct that requires them to put your needs above their own.
Has the board ever disciplined you? Ask which organizations regulate the planner and reach out to these groups for a background check. The CFP Board, the Financial Industry Regulatory Authority, and insurance and securities departments in your state maintain these records.
Can you provide it in writing? Ask your planner to provide you with a written agreement that details the services he'll provide. Keep this document in your files for future reference.
Important Financial Planner Traits
All financial planners should meet certain standards. Look for the following key traits and qualities in any financial planner, no matter what your financial goals might be:
Competence: Good planners are experienced, well-educated and have been tested.
Objectivity: The planner's fiduciary responsibility to serve the client's needs should trump everything else.
Integrity: Trust, professionalism and the pursuit of client needs over personal gain must be the foundation of your planner's character and work ethic.
Fair treatment: Any murky dealings should raise a red flag. The planner should clearly articulate fees, services and potential conflicts of interest.
Diligence: Planners should research all products or services they recommend.
Professionalism: A good planner never gives advice or provides services if he's not licensed and qualified.
Confidentiality: You'll have to divulge sensitive personal information to get the most out of a planner, so it's crucial that he keeps all of that information confidential.
Financial Planners' Fee Structures
Beyond the CFP Board, a good place to look for a planner is the National Association of Personal Financial Advisors, which is the country's leading organization of fee-only financial planners. And the Garrett Planning Network is a group of fee-only planners who make their services available to clients with even the smallest investments. Fee-only planners accept no commissions, act only in the interest of their clients and never make recommendations to generate fees, according to CNN Money.
"Most advisors charge a fee based on their percentage of assets under management," said Joshua D. Duvall, CFP and financial advisor for Cordasco Financial Network in Philadelphia. "You really shouldn't pay more than 1.5 percent per year, and that should include more than just money management. It should include financial planning and advice, as well. Other advisors use a retainer model based on an annual fee, a percentage calculation or some other factor like the client's AGI or net worth. Whatever the mode, make sure you, as the client, understand it and are OK paying the fees going forward."
Duvall advises watching out for common pitfalls like judging a planner on a "transient feature," such as last year's investment performance. Also, make sure you're dealing with an actual planner and not "a broker, insurance salesman or annuity pusher."
In the end, choosing a planner is about selecting someone who shares your values, beliefs, perspective and outlook. "My bottom line is that individuals shouldn't be so focused on the financial products, potential returns or fancy slogans. Instead, they should look for a qualified CFP who shares the same 'DNA,' so to speak, as the client, and is willing to build a strong relationship," said Duvall.
Related: 25 Financial Planners Share Their Best Advice for Saving Money
This article originally appeared on GOBankingRates.com: How to Find a Financial Advisor