At some point in your life you’ll most likely start wondering how to manage your money. Maybe you’re thinking about retirement or investments. Maybe you have no clue what you need to do, but you want help making decisions about your financial future. Once you start thinking thoughts like this, it is time to find a financial planner.
I wish it were as simple as Googling “financial planner insert your city here“. Unfortunately, it isn’t that easy. Just like many other professions, there are plenty of financial planners out there who are motivated by selling you things you don’t need.
With the help of my brother in law, who is a certified financial planner, I’ve put together this list to help you figure out how to choose a reputable financial planner.
Trust– First and foremost, pick someone who you trust. Word of mouth is powerful here. Ask your friends, family, coworkers, your accountant and any other financially savvy people you trust. You want to make sure your financial planner is honest and ethical.
Series 7 license– Financial planners can get many different licenses and some of them are much easier than others. Many people get an insurance license that allows them to call themselves financial advisors. Find a financial planner who has taken the Series 7 licenses. This takes months of studying and allows the financial advisor to discuss and offer a variety of investments to meet every type of client. Even better, they won’t be trying to push insurance on you that you don’t need!
CFP® designation – You’ll want to find an advisor who is a Certified Financial Planner. In order to obtain this designation the advisor must have a bachelor’s degree, take a variety of college level courses in areas of taxation, investments and insurance, have at least 3 years of experience in financial advising, and pass the CFP® exam. The exam only has a 40% passage rate, which means you know your financial planner is the best of the best. A CFP® also has to swear that he will always be a fiduciary to the client, meaning he is legally obligated to always work in the client’s best interest. Why does this matter? Because any other “financial advisor” can legally sell things for a big commission, even if it isn’t in the best interest of the client.
Find an independent financial advisor– It’s quite possible that you’ll find a great financial advisor with a big firm such as Merrill Lynch and Edward Jones. The only flaw is that these financial advisors have sales managers that are telling them what to sell to their clients. If you choose an independent financial advisor you won’t feel pressured to buy things you don’t need because they aren’t trying to meet sales quotas. LPL Financial, Ameriprise and Raymond James are three examples of large brokers that work with independent financial advisors. The main thing you want to avoid is someone who works for an insurance company and calls themselves a financial advisor. Most likely they are only trying to sell you insurance that you might not need.
Use Broker Check– FINRA, the regulatory agency for financial advisors, publishes the following information: customer complains that resulted in litigation, if the financial advisor has ever been fired or forced to resign because of misconduct, any financial trouble they have experienced as well as if they have committed a crime. You should be able to find plenty of financial planners who have worked in the business without any of these problems.
If you follow these tips, you’ll be able to find a very reputable financial advisor. It’s a huge decision to put your money in someone else’s hands and it shouldn’t be taken lightly. Many people I know have been taken advantage of by financial advisors who are not reputable. Please do your homework and find one that will take care of you instead of taking advantage of you.
Over the next couple of weeks I’ll do a follow up on how financial planners get paid and questions you should ask your financial planner when you meet with them.
Special thanks goes to my brother in law, Dustin Rinaldi. He is CFP® and owns Rinaldi Wealth Management which is affiliated with LPL. He is helping me with this series and has provided me with so much valuable information. If you are in Southwest Florida and looking for a financial advisor, I highly suggest contacting him.
Do you have any more tips? Have you used a financial planner?