Things to Know Before Hiring a Financial Planner
Never thought about hiring a financial planner? Think you can manage quite nicely by yourself, don't worry you are not alone, but that doesn't make you right. Virtually anyone with a moderate to high income could benefit greatly from the expertise they bring to the table.
By financial planner we mean someone with the expertise to produce a financial plan for an individual household or company. They have a good knowledge of accounts, tax planning, investments and estate law to mention a few of their areas of expertise.
This is not to say that a financial planner is an expert in all these fields. It might be useful to view them as a General Practitioner, a doctor trained to treat a wide variety of illnesses and health issues. He can give you a health checkup and provide the cure to your disease or illness. However if he finds a problem he can't solve or he doesn't know enough about, he will send you to a specialist which has more experience in that specific area of expertise.
A good planner will do precisely that, give you the advice you need or at the very least help coordinate your financial planning with your accountant, insurance agent, investment professional and estate lawyer.
You might have avoided hiring one because you felt it would be too expensive but if you have a large income you could save a fortune by hiring a planner that will help you avoid expensive financial mistakes that could seriously damage your financial health.
The next question is how to choose the right planner?
The first step when looking for a financial planner is to only hire someone that can prove they are certified in financial planning. There are a variety of associations that provide certification in Financial Planning; two that are highly recommendable are the Certified Financial Planner and the Personal Finance Specialist, given only to qualifying Certified Public Accountants.
The second step is to ask for recommendations from people you respect that can provide positive feedback on the financial planner in question. This is probably the safest method as the best trained financial planner is no good to you if he doesn't have the interest of his clients in first place.
The third question is how much it will cost you and how they will receive compensation. If the hiring fee is too large any saving the financial planner makes might not be worth the effort. They fall into two broad types, fee-only financial planners, and commission and/or fee-based.
Fee-only planners charge you for their advice by the hour. They analyze your situation and suggest the steps you should make. Pretty straightforward, this is why many are attracted to this type.
On the other hand commission based planners charge an asset based fee, typically 0.5% to 1.5% of your assets. Remember that this fee is charged annually and that financial planners will generally invest your money in a mutual fund that also charges a management fee annually.
Financial Planner
