When is a financial planner not a financial planner? More often than you might think.

You’ve decided to hire a “Financial Planner.” That’s the easy part.  Now comes the hard part — should that person be an investment advisor, realtor, CPA, or insurance sales person?Frankly, it’s not immediately obvious who you should choose.  There are real estate brokers who indicate they manage investments.  (And they do.  They manage your rental properties.)  There are investment managers who say they do “financial planning,” but all they really do is buy and sell stocks and mutual funds for a fee.  There are CPAs who give investment advice, because it’s a lot more exciting than doing taxes.  There are even insurance salespeople who claim they will do your financial plan, though those plans always seem to involve the purchase of large amounts of expensive insurance policies.All this leads to a situation that is confusing not just for the consumer, but for the advisor as well.  Cerulli Associates, a research firm to the securities industry, found that “The majority of advisors (59%) described themselves as providing financial planning services.”  After reviewing the services offered, Cerulli concluded that 56% of the total respondents were actually investment planners.”  The study indicates that “only 30% actually fit the definition of being better qualified and certified, working with clients to build comprehensive plans that include insurance and estate planning.”
So, how do you know you are going to get genuine, objective financial planning from your “financial planner”?  Insisting on the CFP® mark is a good first step.  There is a credential/licensing standard to be a Certified Financial Planner ®, and you can read all about it athttp://www.cfp.net/learn/knowledgebase.asp?id=9
If you are considering a financial planner who you suspect is not focused on providing a real financial plan, or if you are working with an advisor who thinks it’s more important to plan for their future by selling products, than to plan for your future by providing actionable, objective advice, you might not be getting the help you need.Before you hire any financial planner, my suggestion is to ask to see a sample of the financial planning materials they provide for their clients.  It should be a detailed, personalized, cash-flow based plan that projects annual income and cash flow, including income taxes, tied to year-by-year retirement account distributions, with year-by-year spending and income assumptions.Once you’ve found a financial planner who really does planning, there is still one more hurdle to jump.  “Cerulli found that more than 60% of all investors were unaware of the type and amount of compensation their adviser receives,”It’s an ugly combination:  not getting the service your need, and not knowing what you are paying.  Fortunately, an independent Registered Investment Advisor, or RIA, must put their fee schedule in writing in their client agreements.  On the other hand, I have seen client agreements from large brokerage firms that only indicate that special fee arrangements are in place with no specifics provided.  If the client was asked to write a check for the investment management fees, there would not be so much confusion.  Instead, it’s the industry’s habit to draw the fees directly from a money market account that is under the management of the advisor.  Once again, be sure you know what you are getting and what you are paying.

If you have a sinking feeling that you’re not getting the services you need, or paying too much for the services you’re getting, then you may want to meet with an independent hourly financial planner like me.  I offer a complimentary meeting where we can discuss your financial planning needs.  Still not certain you need financial planning?

I also offer a Financial Planning Needs Analysis.  The Needs Analysis is a survey completed by the client using an online application.  Answers to the questions elicit information that provides indicators about whether the responder has taken advantage of commonly missed opportunities to save on taxes, maximized returns on investments, taken steps to protect income and assets risks and generally provides a snapshot of a person’s financial savvy. Based on the results, I write a brief summary of indicators of possible future problems and offer suggestions for specific actions that they can take immediately.  I review the report and recommendations with the responder in a 30-minute appointment.

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