Retirement is just around the bend for many of us. Scary thought…what if you just don’t have enough money to retire? Well, even if you’re nearly at the end of your career, it’s not too late to chat with a financial planner for help navigating life events. Thankfully, there are many different services and options for varying income levels and budgets.
But what exactly does a financial planner do?
One thing we can all agree on is that getting educated about managing money is a necessary part of planning any financial future. Financial planners advise their clients on decisions related to managing their money. Depending on the area of expertise, financial advisors can help you with everything from putting together an entire retirement savings plan with a timeline attached to it or simply answering questions about everything money-related from divorce, paying off debts, life insurance policies, 401K’s, to mortgages.
Within the financial advisor field, there are many different designations and industry credentials, including certified financial planner (CFP), chartered financial analyst (CFA), and chartered financial consultant (ChFC). Of these designations, one of the best-known is the certified financial planner (CFP). This designation is issued by the Certified Financial Planner Board of Standards (CFP Board) in this country. The CFB Board mandates qualifying exams and continuing education for those with the certification.
Many financial planners will work with folks on a one-time basis to come up with a financial plan or help with a money-related issue, so calm those fears about being locked into an advisor for life! These money experts work on an hourly basis or agree to take on the project for a flat fee. When you need a la carte money advice, a fee-only financial planner can be an affordable choice with no strings attached. You should also ask whether they are a fiduciary, which is a legal and ethical term to signify that a financial advisor is committed to putting your needs over their profit incentives.
If you’ve been with your company for eons you might be offered a buyout package and asked to take an early retirement. Hiring a financial advisor can help you sort through your options. They can help you evaluate any incentives your company may be offering, such as enhanced pension benefits, and help you plan the long-term costs or benefits of such a decision.
Before you hire a financial planner make sure they are legit and will act in your best interest. Begin looking for your expert through online directories, such as the CFP Board’s online database, which lists a number of qualified professionals who work in your area as well as virtually. And before you trust anyone with your goals (and personal information), use these directories to check a financial planner’s credentials. If a professional claims to have a license or certification (the three-letter designation after their name), do check them out by visiting their licensing board’s website and looking them up.
If you’re ready to hire a financial planner, here are a few questions you’ll need to ask before pulling the trigger:
- What are your credentials? When you ask this question, you don’t want to hear anything along the lines of, “I specialize in retirement accounts,” this is a response that is not specific. When it comes to a financial advisor, credentials matter. If you have more specific financial needs, you might look for a more specialized credential, such as a CDFA® (Certified Divorce Financial Analyst).
- How long have you been a financial planner? It’s also a good idea to choose an advisor that has at least ten years of experience dealing with folks who are similar to you. You also want your adviser to have a clean record, meaning they have not had issues with regulators or the law. Don’t think twice about asking if they’ve ever been sued. You want to make sure there are zero red flags before trusting an adviser with your money.
- What is your fee structure? There’s a variety of ways advisors can charge clients. Decide which payment methods you prefer, then find an advisor who uses that strategy. Will you pay an advisor a flat fee or an hourly rate? Will the advisor receive commissions on common financial products like annuities, mutual funds, insurance, and more? There are several options.
- What services do you provide to your clients? A financial advisor may provide tax planning, college planning, strategies to get out of debt, life insurance, education, investment management, and more. Consider your potential future money needs as well as your current ones.
- What’s your investment philosophy? A strong financial advisor will take the time to learn about you, and all the people and things that matter most to you. It’s important for them to fully understand your unique financial picture and why you’re investing. So, they’ll ask detailed questions about your goals, your current financial position, and where you want to be long term. It’s only after these conversations that they should start recommending strategies or products.
- Who Are Your Typical Clients? It’s important to get a sense of what types of clients a financial advisor you are evaluating typically caters to in order to make sure they have experience and expertise aligned with your circumstances. A young person who is just starting out, might not be best helped by an advisor who caters mainly to baby boomers nearing retirement or retirees.
- How will you communicate with me, and how often? Communication is key to any successful relationship. A financial advisor should be proactive. They should give you regular updates and the latest investment guidance and research. And they should periodically check-in to see if your needs have changed since the last time you met.
Bottom line, a money expert can offer you a roadmap to where you want to take your life financially. Look for an open, transparent, and collaborative financial advisor who will work in your best interest and in a way that truly adds value to your financial style.