Although I’ve never hired a financial planner, I have had to hire an expert to help me do something I could potentially have done myself. Earlier this year I switched gyms and the new one had less exercise classes. After two years of either going to a class or doing cardio I had still not started weight lifting. I always had a reason to skip it. The truth was I didn’t know how. After some half-hearted attempts to learn I realized I was not disciplined enough to learn this skill on my own. The routines online confused me and my motivation barely lasted past five minutes.
Shortly after joining the new gym they offered me an introductory personal trainer session. At first I was an adamant no. At the time my main objections were that it’s expensive and it’s something I should be able to figure out on my on. But then I saw that I could afford it and realized that I was probably not going to learn it on my own. So I took the plunge and signed on for a one year contract. I can now happily say I am comfortable with my weight lifting routine. And a positive side effect is that my butt has never looked better!
So what does my personal trainer have to do with a financial planner? Both professions have experts who motivate you through behavioral changes. They have been trained to quickly spot possible problems. Plus the best coaches, either for fitness or finances, are just as excited about your success as you are. If it’s fear that’s holding you back, take a look at this great article by Michael F Kay from Financial Life Focus.
What are you looking to solve?
If you occasionally consider seeing a financial planner, what is it that motivates you? Is it a major life event like buying a house, having a baby, or dealing with an unexpected windfall? Is it general confusion in regards to your finances and retirement planning? By knowing what you are trying to solve you will be more likely to look for a financial planner. Also, you’ll be better at interviewing potentials planners.
Here are some questions to consider:
Do you want a simple spotcheck or a long term planner? You may be going through big life decisions and may simply want a second set of eyes to see if you’ve missed anything. Or maybe you haven’t looked at your financial life at all and would much rather prefer to delegate all of it to more confident hands.
Are you willing to implement (or at least consider) the planner’s recommendations? If not, then you’re not ready. I’ve made progress at the gym because I work out between my weekly sessions with my trainer. I cannot delegate the exercise to my trainer, just like a client cannot delegate all financial decision making to a financial planner.
How much time are you willing and able to dedicate to your financial life? If you hate everything to do with finances you may not be a good client regardless of how wonderful your financial planner is. It’s important that you go into the relationship knowing how much will be expected of you and what you can expect from the planner.
What interactions have you had with the financial services before? Are you coming in with uneasiness given the industry’s history? If yes, you’ll need to acknowledge this to yourself and consider what you would need from a financial planner in order to trust him or her.
Who are you hiring?
Before you even begin to look into financial planning it’s important you understand the difference between a financial planner who gives you advice and someone who sells you a product. Two key words in the industry are fiduciary responsibility and suitability. Someone charged with providing you a suitable service will help you find a sweater that fits. A fiduciary will help you get a sweater that looks good on you and goes along with the rest of your wardrobe. Financial planners, especially those that are Certified Financial Planners (CFP), will give you advice in your best interest. Many salespeople hold themselves out as financial advisers, when in reality they are salespeople for mutual funds, insurance companies, or a variety of other financial products.
The way a planner is paid can clue you in on whether they are registered as a planner or whether they are primarily a salesperson. This article focuses on finding a financial planner for advice. When you are looking to buy insurance and know exactly what you need it’s appropriate for you to see a financial salesperson. When you think you may need insurance, but are unsure of how much and how insurance will work with the rest of your financial plan, then you would benefit by seeing someone for financial advice.
Most financial salespeople are paid on commission depending on what they are able to sell you. Financial advice givers may be paid a percentage of the assets they manage, a flat retainer fee, or receive commissions on products. The more you understand about how he or she is paid the easier it will be to know whether there are conflicts of interest. It is very hard to give objective recommendations when the person giving the advice would benefit if you acted in a certain way.
Where do you find a planner?
Once you know what you are looking for in a planner you can start to search. The natural place to start is with your friends and family. You can also go to places like XYPN, NAPFA, Garrett Planning, and FPA if you’re looking to work with a CFP. The CFP designation means the planner has completed an intensive study program, has three or more years of experience, and has a fiduciary responsibility to clients. Moreover if he or she has a CFP designation you can quickly find out if they have ever been professionally reprimanded for unethical behavior or has been bankrupt.
Regardless of where you get a potential planner’s name, be sure to research them. Most planners have a website that will give you a feel for what they are like. You’ll also have to consider whether you are comfortable with a virtual planner because that would widen the planners you could potentially work with.
In order to select the planner take the time to interview them. If you are married or share assets and finances with a domestic partner it’s imperative to have him or her also be involved in the interview process. If you really like your planner, but your husband doesn’t trust her it’s very unlikely that any of her recommendations will actually go through.
During the interview focus on competency and fit. Does the planner actually understand your finances and what you need? Can you see yourself working towards a solution with them be it short or long term? Do you feel listened to or does it seem the planner has already put into you into a cookie cutter solution?
It can take time to find a planner that fits your needs. Once you do find one the next step will be to actually do the work. By clearly knowing what you’re looking to do in your finances you’ll be better able to find someone who can help get you there.
What if it doesn’t work out?
Sometimes our first choice is not our best choice. My first trainer was really sweet, but after a couple of sessions I realized I wasn’t learning anything. Sure, I worked out, but we also spent a lot of time chit chatting. It took a lot of effort on my part to speak up and say it wasn’t working. I was ready to break our contract and pay the hefty fee. Once I got to courage to address this with him I explained that I wasn’t learning how to create my own routines. He told me that a different trainer would be a better fit. It was so simple and there were no hard feelings! I’m so much happier with my new trainer. Plus next time I disagree with a professional I’ll be quicker to speak up.
Call me a wuss, but I hate telling “professionals” that I’m unhappy with their service. My first instinct is to agree with them because they’ve been trained on the subject, but this isn’t always the best thing. When you do start to work with a financial planner keep in mind what you’re trying to accomplish. This will help evaluate whether this person is actually a fit for you. At the same time, be flexible enough to re-prioritize depending on what they are showing you. At the end of the day, financial planners are meant to ease the concerns you have regarding finances.
Best of luck!