You can get a tremendous amount of information online to help you decide where to invest, but if you don’t know what to do with that information, you are unlikely to be successful in the long run, as pointed out by Russell Wayne CFP on the website Investopedia. Finding a financial planner who you can trust and with whom you will be comfortable will be the difference between the right road to worthwhile retirement planning and personal wealth management and ending up at a dead end.
Why shouldn’t you just trust a stockbroker? A stockbroker is a salesman, not a portfolio manager or knowledgeable analyst of the broad range of investment opportunities. And in most cases, the cost of working with a stockbroker will be significantly higher than being helped by a financial planning specialist.
That being said, you need to know what to look for in a financial planner to make sure that your nest egg is in good hands. So here are the 5 essential requirements that you should look for in anyone giving you financial planning advice:
- Experience
You must insist on someone who has at least 10 years of experience in the industry; even better would be someone who has been involved through the downturn of 2008-9 or longer. This experience should include a substantial amount of portfolio management and financial planning with clients having similar situations and objectives.
- Transparent Fee Structure
Hidden fees are unexpected and unwelcome surprises. You must learn in advance what your costs will be. The costs are generally of three types: fee-only, fee-based, and commission-based. Fee-only means exactly that: a flat annual fee or a fee based on a percentage of the assets under management. For financial plans, there would be a flat fee. Fee-based means there is a fee component and in addition there may be commissions for other products, such as annuities or life insurance, that may be offered. Commissions are sales charges for products sold.
The fee-only approach is the most transparent and least conflicted since recommendations will be based solely on what’s in the client’s best interest. Whether or not the recommendation is accepted there will be no difference in the charges involved. A commission-based arrangement is the polar opposite. Every recommendation comes with a prospective incentive for the salesperson.  That does not put the client’s interest first.
- Clean Record
It is crucial that you do your research to ensure that your financial planner has a clean disciplinary record. You can access this information by looking for their Form ADV (the required disclosure form found online at https://brokercheck.finra.org), searching by the name of the financial planner or the firm. The ADV will tell you if there have been any issues with the law or the securities regulators. Avoid planners with marks on their records.
- Certifications and Designations
There are many different certifications and designations that a financial planner can have, but only two are meaningful: Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA).  Both require years of preparation and must pass rigorous testing. CFPs have a broad-based range of knowledge including investments, budgeting, debt management, education planning, retirement planning, estate planning, taxes, and insurance. They run the gamut of the areas that are of most concern to individuals. CFAs, however, focus primarily on the intricacies of investments and are usually employed by major institutional investors, rather than working with the public.
The objective here is to find a planner who you can trust, who is knowledgeable, and who can provide you with the best help possible.
- Standard of Care
This is a critical distinction.  Registered investment advisory firms (also known as RIAs) must put their client’s best interest first since they are legally required to be fiduciaries.  This is different from advisors at banks or brokerage houses. Those “advisors†are currently held to a much lower standard: suitability. They are required only to select and recommend services that may be suitable for you, but those services may not necessarily be in your best interest or, for that matter, available at the least cost.
If you are looking for sound advice for your assets, visit www.soundasset.com