Wednesday, July 15, 2009

Help With Financial Planning

Not all financial planners are the same

If you're considering using the services of a professional financial adviser, you should be familiar with the basic steps of the financial planning process and know how to evaluate an industry professional to determine if his services are appropriate for you.

By recognizing the methodology used by financial professionals, you will be better able to evaluate your adviser’s performance or more easily select a new representative.

The Facts

There are many subdivisions within the financial services industry, and a great number of representatives from each of these areas refer to themselves as financial advisers, planners, counselors and specialists. But these professionals perform varying degrees of planning, and the processes used often vary dramatically.

Choosing a financial professional, whether it be an independent adviser or a corporate representative, should be done carefully and with focus on proper credentials and synergy of goals.

Finding a Professional

When you're searching for and hiring a professional for the purpose of financial planning, you should seek out an individual who holds a Certified Financial Planner (CFP) designation. The Certified Financial Planner Board of Standards is an independent organization dedicated to representing and educating the public and upholding and clarifying moral and ethical codes within the industry. Only those individuals who have successfully completed rigorous educational requirements and demonstrated the highest standards of excellence are permitted to use the CFP designation on their correspondence.

Certified Financial Planners are educated in multiple areas of financial planning, such as general principles of financial planning, insurance planning and risk management, employee benefits planning, investment planning, income tax planning, retirement planning, and estate planning.

The Process

The financial planning process is usually a long and involved one, requiring active participation from both you and the adviser. After an initial interview to discuss credentials, methodology, and pricing structure, a series of additional meetings are usually required. At the next follow-up appointment, you'll bring copies of several documents related to your current financial status, such as your most recent investment account statements, loan documents, income tax returns, pay stubs, insurance policies, and estate planning documents.

The financial planner analyzes this information and generates a report detailing her thoughts on your current situation, hypothetical future projections and recommended adjustments. This report is presented and reviewed at the next appointment.

After you've had the chance to examine the analysis and accompanying recommendations, another meeting is held to address your questions or concerns. You also will decide which, if any, of the adviser’s recommendations you plan to implement. Assuming you're comfortable with the adviser’s services, a plan of action is begun and the proposed changes are set in motion.

Fees for Service

Financial advisers are paid in different ways depending on the services performed and their agreements with clients. Compensation should always be discussed and disclosed before you request services, and at no time should additional fees, charges or commissions be added without your prior written consent.

In some cases, you will pay a flat fee for the adviser’s analysis and recommendations. Other advisers charge nothing for the analysis, but he earns a commission from any products sold if his recommendations are implemented. Occasionally, financial advisers are paid both a fee for the analysis and commissions from the sale of products.

Check Credentials

Before disclosing any confidential identifiable information to a financial counselor, you should perform your own due diligence. The current license status of any insurance or investment professional can be checked quickly via the Internet. You should ensure that your adviser is licensed in your home state and that no consumer complaints have been filed. Information about an adviser’s professional history is also readily available and should be reviewed to determine whether she has sufficient industry experience to handle your needs.


Topic List for CFP Certification Examination
Top Things To Know

Resources (Further Reading)

CFP Board of Standards
FINRA Broker Check

This article is a Twisted Nonsense Exclusive! (07/15/2009)

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