Money isn’t everything, but it sure is important! As with any of life’s treasures, you need to look after it well. Financial planners, first and foremost, should help you do this. Remember, it should be in your financial planner’s best interest to coach and enable you to achieve sustainable, long-term gain in your financial matters. The longer you’re wisely managing money and building your portfolios, the longer he will have a client – and, the more likely you’ll be to recommend him to your friends.
But that’s not always the case. Some financial planners may be fly-by-night charlatans, so here are few pointers to help you make an informed decision about who you might choose!
Do not rely solely on recommendations from friends and family to make a decision
Referrals are excellent and can help establish trust, but make sure you keep looking at the bigger picture. Everyones financial situation is unique; an advisor who worked well for somebody might not work well for you. Step back and take your time in making your decision.
Consider what kind of advisor you are looking for
Financial planners advise clients on how best to save, invest, and grow their money. They could assist in developing and realising financial goals, such as preparing to buy a house, or give you an overview of your portfolios and the way that they all work together. Some specialise in retirement or estate planning; others consult on a range of financial matters. Ask your planner what they are certified to advise on.
There are numerous types of financial planners and advisors (brokers, fee-only planners, fee-based planners, comprehensive planners, tax advisors, estate planners etc.) and people tend to assume they are all basically the same. This is a dangerous misconception. It would be like hiring a plumber to hang a door, or a carpenter to fix a leak. Find out from your financial planner what he specialises in.
Be realistic about investment strategies
Ask your certified financial planner about their strategy to structure your investments to meet your goals. When you first meet with the planner, you should outline what financial goals you have in mind. Whether it is retiring with millions or risking some money on high-return investments, take this time to ask about the reality of those goals. The planner will talk to you about investment strategies for realistic goals. If the manager promises constant returns on your investment, you should be suspicious. No investment is perfect.
Who are they affiliated to?
Finally, you should know what affiliations your financial planner has with any of the companies, products or services being recommended to you. If he has any, they should be disclosed right away. It doesn't mean that the recommendations are bad: it will just help you make informed decisions on different aspects of your investments.
Be careful not to confuse salesmen with financial advisors
Salesmen are typically individuals who work for brokerage houses. Often their primary job is to sell stock. They tend to call themselves financial advisors but they are not usually registered as investment advisors, which means they do not have a fiduciary duty (that is, a legal obligation) to do what's absolutely best for you.
Remember, you’re in control of your personal finances. If at any stage you want a second opinion, get it. Never rush any big decisions and always step back to look at the bigger picture! There will be a time for risk and a time for caution.