The era of self-directed retirement planning is a boom market for financial advice. There are many professionals who will help you, whether you need a broker or a banker.
Be careful. There are many financial advisors. A good advisor will help you accumulate the funds you need to meet your goals. However, a bad advisor can waste your money on unwise investments or hidden fees.
How can you find the right advisor for you? You are the answer.
Consider the type of service you require. Are you looking for help in investing decisions or a complete plan that addresses your insurance requirements, your savings and your investments?
You can usually get help with investing if you don’t need it. Sometimes, your mutual fund company can provide assistance.
Vanguard Investments, a mutual fund giant, has a financial planning department that can help you to set up the right investments to meet different goals. The service is $1,000 for those who are not Vanguard clients. The fee for Vanguard funds worth $50,000 or more is $250. It’s also free if you have assets greater than $500,000
These plans focus on retirement planning and recommend specific investments and savings levels that will ensure you have enough. You should talk to someone if you have more complicated goals such as planning for a disability or for a child with a disability, or if you require regular financial advice.
You should consider a live planner (or virtual). There are two main types of planners. Those that are paid by you in hourly or percentage fees, and those who earn commissions from insurers and fund companies for selling products.
Many experts agree that you should choose a fee-only advisor to avoid conflict of interest. However, Chuck Jaffe, author The Right Way to Hire Financial Help, disagrees.
First, advisors who charge a fee only won’t often work with clients with modest incomes. They are usually paid on a percentage basis of assets under management, such as 1 percent of $250,000 they invest. This means they won’t accept clients who are just starting to make a living and haven’t built a nest egg.
There are also many planners who make a living by selling products. These planners may be able to offset the cost of creating your plan if you decide to buy these services.
It is up to the client to identify the potential conflicts and decide if they are comfortable with evaluating recommendations that may be affected by the economic interests of the planner. The majority of the largest commissions are earned by whole life insurance policies, and so-called load mutual funds. These are the types of plans that planners recommend. You will need to know how much he is paid if you purchase them and then assess his recommendation within this context.
You may need to find a new planner if your planner is selling you too many things that you don’t understand your goals. If the planner’s offerings are compatible with your needs, then you might be able to get great advice at a cheaper price.
How can you find out if your planner is earning commissions? Jaffe says there are two ways you can find out if your planner earns commissions. 1: Ask. 2: Check your planner by visiting the government’s broker check website.
Jaffe notes that the question should be used as an honest check. A decent planner will happily explain how much she was paid and give a copy her ADV form. This forms the details in writing. The form you receive from the broker check site should be identical. You should not accept a form from your planner that is different from the one you receive on the government website.
Important to remember that regulators require planners provide a copy the second half their ADV (the ADV, Part II) to anyone who requests it. This section explains the compensation schedule. Jaffe suggests that you complete both sections of the form.
Why? The first half will tell you if the planner has any disciplinary history or client complaints or settlements. While a settlement or two does not necessarily mean that you should dismiss the planner, it should prompt you to ask more questions. Numerous complaints are an indication that you should look elsewhere. You should read the entire ADV.
How do you start looking for a planner? Asking for recommendations from family and friends is a great way to begin. You should realize that planners are often specialists. If you’re a middle-income educator, you don’t want someone who works exclusively with high-end investors bankers. You are more likely to know the issues than the planner. You can also ask for referrals from trade groups such as the Financial Planning Association and the http://www.napfa.org/National Association of Personal Financial Advisors.
Interview at least three planners. Jaffe suggests that you interview at least three planners, even if you like the first one. Interviewing more people will help you to understand the industry better and ask the right questions to ensure a successful relationship.
Jaffe says that the first planner sounds almost always great. This is partly because it’s an relief to hear that he will provide a variety of services that will relieve you from all your worries. After another interview, you will see that they all do this. You will be able to look more deeply into the potential partnership between you, a planner, and the interview. You can then go back to the planner that you like most and ask more detailed questions. If the answers are correct, you can start your business.
Jaffe states that there are planners who only run the numbers and planners who want to learn about your goals and how they can help you achieve them. You want to be able to answer their questions but also to hear what they are asking.
A person who doesn’t share your goals will not be able help you realize them. This is all about forming a long-term partnership.
Jaffe says, “What you want in a planner is to hire someone you will want to keep for your entire life.”
