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Giving the Gift of a Financial Planner
The holiday season should be about giving, but at the end of
the season, most people can't help but think it's all about
spending and money out the door. What would happen if you and
other family members considered a different gift this holiday
season — the chance to build your financial awareness with a
trained expert?
Financial planning is an investment. It costs money. But its
potential returns are manifold — a chance to get a handle on
current problems with spending, debt and investing and a
long-term opportunity to diffuse fear of financial issues by
learning everything possible about them. It doesn't matter if
you are a single working individual or a family with kids still
at home — the right financial planner can be a long-term partner
in re-educating everyone in a household about money and the
right ways to handle it.
For many people financial planning is a reaction to an
emergency, such as a divorce, the death of a spouse or a sudden
windfall. But in making the decision to do financial planning as
an ongoing part of your life, you have the chance to fully
review all your spending and investing decisions and maybe allow
each of your family members to do individualized planning that
will set them on a good course for life.
Here are some questions you should ask a prospective
financial planner:
What training do you have? Find out how long the
planner has been in practice and what kind of certifications
they hold. A CERTIFIED FINANCIAL PLANNER™ professional is
someone with a minimum of three years who has completed a
comprehensive course of study at a college or university
offering a financial planning curriculum approved by CFP Board.
CFP® practitioners must pass a comprehensive two-day, 10-hour
CFP® Certification Examination that tests their ability to
apply financial planning knowledge in an integrated format.
Based on regular research of what planners do, the exam covers
the financial planning process, tax planning, employee benefits
and retirement planning, estate planning, investment management
and insurance.
What services do you offer? What a financial planner
offers is based on credentials, licenses and areas of expertise.
Generally, financial planners cannot sell insurance or
securities products such as mutual funds or stocks without the
proper licenses, or give investment advice unless registered
with state or federal authorities. Some planners offer financial
planning advice on a range of topics but do not sell financial
products. Others may provide advice only in specific areas such
as estate planning or on tax matters.
How do you charge for your services? Professional
planners will provide you with a financial planning agreement
that spells out the services they provide and how they'll be
compensated. Payment can happen in one of several ways:
- Salaried planners
are actually employees of a firm, and you help pay their
salaries through fees or commissions you agree to pay.
- Direct fees to
the planner through an hourly rate, a flat rate, or on a
percentage of your assets and/or income.
- Commissions paid
by a third party from the products sold to you based on the
planner's recommendations. Commissions are typically a
percentage of the amount you invest based on those
recommendations.
- A hybrid of fees
and commissions based on services. A planner may charge a
fee for designing a comprehensive financial plan and
occasional visits and calls to review it, while commissions
might come from products they sell that you invest in.
(Planners may offset some fees in exchange for commissions.)
Do you have any potential conflicts of interest? It
may seem like a rude question, but the best planners expect this
one and are prepared to make disclosure. Obviously, if a planner
profits from the sale of investment products to you, she must
spell that out.
How do you feel about teaching and training? One of
the primary benefits of having a financial planner is education
about the moves you are making or may potentially make. Don't
view a planning relationship as tossing someone your finances so
you won't have to deal with them anymore. As long as you're
paying for their services, make sure you get a long-term
education out of it.
November 2008 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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