Financial Planners - Choosing One You Can Trust
In a challenging economic environment, finding a responsible financial planner and money manager is extremely important. According to research by the Congressional Budget Office, released in October 2008, it was estimated that U.S. retirement accounts had suffered a loss of two trillion dollars in the previous months - or about 20 percent of their value. While consumers are looking for help in rebuilding their nest eggs, their trust in financial experts and planners has been badly damaged by questionable judgments and unethical practices on Wall Street.
A financial planner helps clients manage their money and meet financial goals, such as retirement, buying a home, or planning for college.
Better Business Bureau offers the following advice on finding a financial advisor that can be trusted to look out for the best interest of their clients.
Get educated. There are many books and resources available online, in stores or libraries that will help consumers understand finance and investing. A little education early on will go a long ways in deciphering what financial planners are saying. It will also help with spotting red flags. Financial planning and investing can be intimidating, so doing your homework will help you decide if an advisor is right for you.
Look for credentials that matter. There are various titles or designations financial planners may associate with their names. Two titles or designations that a qualified financial planner may legally use with their name are CFP, "Certified Financial Planner," or ChFC, "Chartered Financial Consultant." Both designations mean that the financial planner has received specific financial planning training, successfully passed rigorous exams and is required to pursue and complete continuing education credits to maintain his/her licenses.
The Certified Financial Planner (CFP) Board of Standards sets and enforces standards that define professionalism for financial planning. Consumers can verify CRP certification status by visiting: http://www.cfp.net/
The American College of Financial Services is the institution where financial planners receive certification and earn the designation as a ChFP. Consumers can verify ChFP credentials by visiting http://www.designationcheck.com/advisor-search
Consumers can also verify credentials with the Financial Industry Regulatory Authority, which regulates all securities firms operating in the U.S. by visiting: http://www.finra.org/
Other groups such as the National Association of Personal Financial Advisors (http://www.napfa.org/) and the Financial Planning Association (http://www.fpanet.org/) also offer certification and credentials to help consumers identify financial planners who have made a commitment to ethics and learning.
Financial planners that work with securities in conjunction with their investment advice must be licensed in all states where they offer products and be registered with the Securities and Exchange Commission (SEC) (http://www.sec.gov/) along with any local state regulatory authority. Be sure to confirm all credentials and licenses with the agencies or organizations directly.
Conduct a tough interview. As with any professional, consumers should conduct a tough interview with the potential financial advisor. This is an opportunity to not only ask important questions about the planner's experience and expertise, but also to determine whether or not the consumer and planner can develop a good long-term working relationship. Don't be afraid to ask tough questions, such as how long the planner has been in the business, their qualifications and licenses, their experience with similar clients and if they have been the subject of any disciplinary actions. Consumers can also ask for references of clients who are in their similar financial position.
Consider the fee structure.There are many fee structures employed by financial planners. Some charge by the hour or a flat rate. Others earn money through commissions on projects sold - which might create a conflict of interest - or a combination of fees and commissions.
If you feel you already have a good handle on your finances, another option is to find a financial planner who is willing to offer expert advice - and a second look - perhaps on an annual basis, at an hourly fee rate.
Other things to look for.All financial advisors are required to put the client's needs first and above his or her own. One sign of a trustworthy financial planner is that he or she isn't trying to sell their client a dubious new product, investment tool or risky stock. Some financial planners are tied to a brokerage firm and are actually trying to make money for their company and themselves through commissions. Another red flag is when the planner claims they can guarantee big returns on investments. There is always a risk involved in investing and no honest planner can guarantee results.
As always, consumers should check with BBB to determine if a financial planner has a history of generating complaints and the nature of those complaints.
For more trustworthy advice from BBB on managing finances, go to www.bbb.org.