How do you find a good one? I did a quick search and found over 50 certified financial planners within like 10 miles of where I live (Aurora, IL). Is it just a word of mouth thing?
Try to find an independent planner who doesn’t work for a large financial institution. I used to have an America Express planner and lo and behold every hole in my risk chart could be plugged by buying an expensive AmEx product. Insurance for this, insurance for that, you name it.
I told her to take a hike.
oh yeah…forgot to add, most financial planners will tell you that you’re spending far too much money on your hobby.
Try to find an independent planner who doesn’t work for a large financial institution.
Do you have a name? If so, can you PM? I’ve been vexed by this same problem for far too long.
I don’t have one right now. With the mortgage I just took on I have no spare cash to manage.
I would recommend that you contact a fee-only planner who is a Registered Investment Advisor. They sell nothing and charge you an hourly fee and/or a fee based on assets under management.
If you have any additional questions please feel free to contact me privately.
The best Financial Planners are those with Experience…
Certifications are a good indicator of the ability to pass exams and gain book knowledge… a good thing to have… However, when it comes to the idea of trust or real world knowledge, that typically is a better indication of level of experience.
The longer a Financial Consultant is around, then the odds are they have a good reputation and firm knowledge base. This is not always the case, but IMO that is a good place to start as a filtering base. Using Certifications may or may include the crucial aspect of financial planners - Experience.
A good source of references are accountants. They have a good feel of which Financial Planners/Consultants have the highest level of competancy and experience. A very crucial aspect of Financial Advice… ya’ can’t take a test and gain experience.
FWIW Joe Moya
As a former financial advisor I’ve never bought into the idea that fee based planners were somehow more unbiased, and less expensive. They are typically getting paid significantly more than other planners.
Go with experience and a personal “fit” with your advisor.
the reality is that alot of them are bad. many of them are really sales people that rely on software to put together your plan for you. maybe I’m jaded, but i used to be the director of recruiting for one of the supposed biggest best firms out there. after working there i decided to never work with a planner again–half of them don’t know shit, and the other half don’t have any money of their own to invest. it’s easy to play with other people’s money.
but if you need one, try to find an independent who has been at it a long time. and get a referral from your most well to do friend or relative. it’s the only way to do it.
also, don’t let anyone tell you that life insurance is the proper way to fund retirement. if i had a nickel for every time i’ve heard that one…it’s laughable.
I would not generalize all fee-based planners as getting paid more than brokers. It all depends on the specific company. For instance, the fee-only planner I use charges by the hour for actual financial planning. He also does this as needed, since a complete financial plan usually deals with estate, insurance, retirement etc. Most folks only need financial help with just a few issues. It’s a similiar relation I have with my attorney and accountant.
He also manages my money for an extremely low fee of 50 basis points using low cost index funds. My total fee including custodial, mutual expense and his management fee is 80 basis points. That’s close to what institutions pay with custidial and management fees.
My wealth manager is also a triathlete (which is kinda cool), honest and I know he’s not selling me any products for his commissions. All fees are disclosed up front and I know as a Registered Investment Advisor he’s taking a fidicuary responsibility for me. Brokers DO NOT have any fidicuary responsibility for their clients…it’s called the Merrill Lynch rule.
Brokers, or financial advisors just get paid to sell products and generate commissions. Just ask your broker or financial advisor about his weekly meeting where they are pressured to make more phone calls and sell more higher commission paying products.
I’m glad to have found his organization, as he only takes clients upon referal.
Good question, Tyrius. Since this is how I earn my living, I’ll offer my $0.02 here
Finding a good financial advisor takes some work. The best place I know to start is by asking as many people whose judgment you respect whom they would recommend. I would give significant weight to the referral from any other related professions (law, accounting).
I have been a member of the National Association of Personal Financial Advisors (www.napfa.org) for a couple of years, and have consistently been impressed by the caliber and character of people I meet through them. Certainly there are many qualified advisors who are not NAPFA members, but looking there will give you several quality leads in your area.
I disagree with the idea that fee-only planners are more expensive. What is vital to keep in perspective is the total cost of ownership (advisor charges, custody fees, trading costs, etc). A fee only planner should be able to break down the TCO for you; most commission based advisors have a hard time doing this. Of course charges vary based on portfolio size; but ou should be able to find an advisor willing to work with you for an all-in cost of about 1 to 1.2% (significanly less at north of $1 million).
Good luck!
Paul
Make sure you ask to see the Financial Planner’s own Portfolio. If he/she won’t show it to you, then find one who will. Then make sure his Porfolio has descent returns. Also, never rely 100% on only one Financial Planner. Make sure to always do your own research in addition.
My two cents!
Disclaimer I am very biased as I am in the business of managing money for a living. I have seen just about everything, good/bad about the financial services/planning business. If I were and outsider looking in I would look at these key points when making my decision.
A) Financial Designations: Know matter what someone tells you the CFP designation is not a big deal. It has been severely watered down over the last 5 to 10 years. Their are some good CFP’s out there that do it right, but alot of them are ex-insurance agents that use this as a way to sell big life insurance policies…or they work for a large firm that mandates they use their products. I would look for two specific designations if I were you. The first is the CFA (Certified Financial Analysts) and the second would be the CIMA (Certified Investment Analysts). If they have one or the other,or both, they are very commited to their practices as it takes one hell of an effort to obtain these.
B) Experience! Nothing takes the place of experience…NOTHING! I have been in business for over 20 years and yes I have made mistakes (nothing serious) and should have zigged instead of zagged. I would not hire anyone without a minimum 10 years of managing clients money and at least 50 million under management. Why? Because they have to provide investment results to back their claims up and provide referrals for you to contact.
C) Independent: Find someone that has their own company that does not have to sell anyone thing. We transfer money in all the time from American Express Planners that have all AMEX Mutual Funds…go figure! We have accounts that have individual bonds/stocks, load/no load funds, ETF’s, Investment Trust etc. No product is the best for everyone no matter what they say!
D) Customer Service: Anyone can say what they are going to do, it is harder to do it. Make sure they are commited to meeting with you at minimum 2 times per year to review the progress that has been made. Double check your referral to see if this has happened.
Good Luck in your search!
“Make sure you ask to see the Financial Planner’s own Portfolio”
Sorry, but that is just lame.
A Financial Planners portfolio may or may not have absolutely nothing to do with what is expected or needed by different individuals.
That would be like going to a proctologist and make sure he does a self exam first…
Joe
You might think it is “lame”, but results and actions speak louder than words. And all those certificates don’t mean a thing, anyone can take those and pass them. I know 8th graders that know how to plan better and pick better portfolios than some Financial Planners.
Well, I disagree…
First of all, you have a very narrow scope of what an advisor/planner does.
Performance is defined at many levels.
Performance defined by after-tax savings. Performance defined by increase income. Performance defined by growth in assets. Performance by both growth and income.
So, lets say the financial consultant has a personal definition of performance based on growth only. Thus, to achieve that performance goal he has aggressive positions in Future contracts, Hedge Funds and predominately small-cap securities. Client sees extraordinary return of 30% in one quater. Client decides that is what they want. Client is 75 year old lady with a net worth of 250,000 dollars and income predominately Social Security. Client makes 20% rate of return in one quater… the next quarter loses 45% rate of return… and ends up with a total loss of 22% by years end. That’s not only wrong, but in violation of regulatory rules.
Now, tell me how noting a superiour performance by using a financial consultant’s personal return is THE correct benchmark to determine the value of his/her services. Well, you can’t.
Performance is a concept that is financial goal and expectation dependent idea. And, that may or may not be the same as the Financial Consultants.
On the otherhand, if you simply saying that the Financial Consultant should have a good overall ability to judge different levels of risk… then, yes… return can be comparitive. And, by that I mean… if the portfolios that are risk adverse have matching lower returns vs. those that are risk acceptant with match higher returns, then yes… performance is important. However, those must be made in a format that is comparitive - apples must be compared to apples.
Your idea is still lame because it does not take into consideration the fact that a Financial Consultant/Planner frequently does not have the same personal financial goals and expectations as the client he is trying to help/advise. In fact, it is more common that they are very different.
The job of a good financial planner is to solve problems. Experience is typically the best judge of how well the problems are solved. While Certifications only indicate they have a grasp of basic ideas regarding financial concepts (…which is important, but not as important as knowing how to use the knowledge).
And, if you know 8th graders that have 20 yrs. of financial experience… well, let me say this… It seems that the Bush’s idea of “no child left behind” kinda’ missed them - A LOT! 
On the otherhand, if you mean a monkey can “pick” securities better than some money manager - well, that’s not saying much and not a very profound statement. The fact is that money management is such a small portion of financial planning/consulting…however, emotion management is a VERY big aspect of the financial advise industry. And, I would agree… many so called “financial professional” don’t undertand this idea. In fact, the worse “financial consultants” are glorified insurance salesmen who use the term “financial consultant” to mask their real intent - sell excessively costly annuities and other insurance products in a fashion as if it’s the cure all for investment ills.
FWIW Joe Moya
Joe,
Obviously, as you noted, there is more to picking a financial planner than my recommendation in my original post about making sure the planner has a strong portfolio of his own. My point is just that someone that has a history of sucess might be a better choice (ALSO GIVEN THE OTHER STUFF LIKE CERTS, ETC.) than someone equally that has never invested any of his/her own money or never had a net return of any significance.
I don’t think asking your planner to disclose his/her investments are too much to ask for, even if they don’t specifically pertain to your case. Lets face it, this is the person you will be entrusting with your life savings, so the more information you can gather on the planner the better (relevant or not).
Personally, if a prospective client insisted on seeing my personal portfolio, I would politely tell them that we wouldn’t be working together.
As has been mentioned, I always want my clients to like and trust me. Although there are planners out there with more initials after their name, I feel my level of commitment to my clients is unmatched.
Find someone that you feel good about. Trust your instincts. Make sure they explain why they’re making their recommendations.
Good luck!
I would also advice staying away from the AmEx Financial Services people. I know a few people that work for them and from the inside, they don’t look so pretty.
Also, I’m pretty smart financially so it will be a long, long time before I’m to the point where I need a financial planner. What’s wrong with you learning more about money and finances and dealing with this on your own?
A) I don’t see the point of ever looking at a planner’s portfolio. His level of risk and my level of risk will likely be two totally different things, therefore his portfolio’s performance would be different than one picked out for me.
B) I’m not looking for a money manager. I’m more looking to sit down with someone and go over my plans for retirement amounts, college savings amounts, savings on the side, insurance, etc to get basically reassurance that I’m going down the right path. I’ve done a ton of research on my own and feel that I have a pretty good handle on things, just looking for the old second opinion.
You are right. Everyone has a different risk tollerance so their portfolios are not going to be the same. I think the person who mentioned this was trying to make a point that if a broker/Financial Advisor is trying to sell you a high commission mutual fund, yet they hold low cost index funds in their portfolios…you should be running for the door.
A fee-based CFP can talk with you and go over exactly what you want “plans for retirement amounts, college savings amounts, savings on the side, insurance, etc to get basically reassurance that I’m going down the right path” and show you all your options.
PM me if you would like get information about my planner. He only takes referals.