Looking for a financial planner can be an intimidating process. It’s not just a numbers game of finding who is best at beating the market. It’s a personal relationship, and a search for someone who will listen to you and work with you to achieve your goals.
A common misconception is that only those with chunks of money to invest need a financial planner, said Ellen Siegel, a Miami certified financial planner.
“Everyone needs a planner, in the same way that everyone needs an annual checkup with their doctor,” Siegel said. “Everyone needs to be educated about cash flow, debt, savings, goal setting, planning for goals and retirement, asset protection, titling assets, insurance and tax planning.”
A pared-down alternative is a robo-advisor: sophisticated computer software that chooses your investments and automatically rebalances them. Sites like Betterment, WealthFront, WiseBanyan, Personal Capital and FutureAdvisor offer robo-investing services. Brokerage houses like Charles Schwab and Vanguard also offer computer-assisted models.
“Robo-advisors offer automated investing advice, and can come at a lower cost, but it’s not very personalized,” said Deanne Butchey, a professor in the Florida International University College of Business. “There are two extremes of people who can use that service. Someone who is very investment savvy and does a lot of research, and someone who has a small amount of money and just wants to get in the game,” she said.
A human financial planner can do a comprehensive financial plan, guide you in money matters like taxes or insurance, or manage your investments for you. If you are a do-it-yourselfer, a planner can review your investments to make sure you’re on track.
Here are some tips to help you find the right financial planner:
Look for professional designations: Anyone can call themselves a financial planner. You can find them at banks, brokerage houses, insurance agencies and independent firms. But don’t confuse a planner with a salesperson. The gold standard is a certified financial planner (CFP) or a chartered financial consultant (ChFC), who has taken extensive classes on several aspects of financial planning. Another designation to look for is someone who has pledged to work at a “fiduciary standard,” which means they have promised to put their clients’ best interest above their own, and recommend products that are best for the client, even if that means fewer dollars in their own pocket. The Financial Planning Association, Onefpa.org, has a searchable list of certified financial planners by ZIP Code.
Look at how they charge: Some planners are fee-only and do not make money on the investments they sell. In South Florida, the average hourly rate is $100 to $500, Butchey said. Others charge an annual percentage of your assets, typically 0.5 to 2 percent, to manage them. Some earn commissions based on what you buy. “They may be tempted to churn, or trade consistently, which will incur a lot of commissions for them, but may not be the best thing for you,” Butchey said.
Fees should be based on the scope of a client’s needs, said Daniel Elie, a Miami certified financial planner affiliated with the Garrett Planning Network. “If they are looking for asset allocation, that is very simple. If we need to do a comprehensive financial plan, that’s a little bit more expensive,” he said.
Garrett Planning was formed to serve middle-income investors and those just starting out. Elie charges only a fee: $175 an hour, or by a flat rate per project. (The National Association of Personal Financial Advisors, Napfa.org, has a searchable list of fee-only planners by ZIP Code.)
Siegel, a fee-based planner who also earns money from selling investments, charges $400 an hour for herself and $150 to $200 for her senior planner.
Many planners have a minimum investment amount of $250,000 and up. “They may charge an upfront planning fee of $750 for a computerized program, up to $10,000 for portfolios in the millions,” Siegel said.
Some planners offer a second opinion for do-it-yourself investors who have their money with low-cost brokerage houses like Vanguard, Fidelity or T. Rowe Price, or who have most of their funds tucked in a 401(k). “Since [these clients] don’t have a chunk of money that needs to be managed, those people would pay a flat fee for a year of planning and guidance,” she said. That fee could range from several hundred to several thousand dollars, or a percentage of net worth. The client could go back for a recheck as needed.
Do your research: Look at a planner’s website for his or her specialization, such as college or retirement planning, and read the bio, Butchey said. Determine how much money you want to invest. Think about how much time you have to invest and your goals.
“Prepare to shop around and ask many questions. It’s a personal relationship,” Elie said. “You have to feel comfortable, and you have to be able to trust the person that’s going to work with you.”
To start, make appointments for an initial consultation with a few planners, Siegel said. “Some charge and some don’t. Look for someone who listens. Ask about risk tolerance. There should be some kind of objective tool, such as a questionnaire, in addition to conversation, to help the planner gauge your tolerance,” she said. “Poke them about how they will get paid.”
Be prepared to do some of the talking in the interview. “Just like when you go to the doctor, bring a list of questions,” Butchey said. “You want to make sure you find someone you’re comfortable with, who is comfortable answering your questions.”
Ask about access. “It should be a minimum of a face-to-face once a year,” Siegel said. “If you’re going to be assigned to a member of the planner’s team, you should interview that person as well.”
Ask for references of clients who are similar to your situation. Check the CFP Board website or the Financial Industry Regulatory Authority, Finra.org, for any disciplinary history for unethical or unlawful acts.
Above all, it’s important that you have a good rapport with an advisor, that they listen to you and understand your personal goals, Butchey said.
“A client has to feel comfortable and trust the advice he has been getting, and if he’s not getting what he needs, he should look for another planner,” Elie said.
Questions for a prospective financial advisor
- Tell me about your experience in this field. How long have you been in it?
- What are your qualifications and education?
- What professional organizations do you belong to?
- What services do you offer?
- What is your investment philosophy — conservative or aggressive?
- What types of clients do you typically work with?
- Who will handle my account?
- How are you paid?
- What are your typical fees?
- Are there any conflicts of interest in the products you sell?
- Have you been disciplined for unlawful or unethical actions?