Two critical things to consider before hiring a financial planner
From Dr. David Eifrig, MD, MBA, Editor, Retirement Millionaire:
Over the years, I’ve railed against paying so-called “experts” for things you can do yourself. More often than not, they’re simply plugging your info into a computer program or spreadsheet that spits out an answer. It’s usually worse than useless.
In general, you know what the best, most sound financial decisions for your life are…
But we’ve talked to several folks in different life stages. And there are two specific situations when you might consider hiring your own financial planner…
First, hiring a planner can be helpful if your time is limited.
For many people, researching financial planning is overwhelming or too time-consuming to put in the amount of effort you need.
Now, I love to comb through news and market reports and find the absolute best places to put my money (and where to recommend putting yours), but I realize not everyone enjoys that. Maybe you don’t feel that you have the time to do the proper research or to hash out the best savings vehicles for your kids’ education.
Second, if you’re experiencing big changes in your life, sometimes getting a professional opinion is worth the time and money.
If you’re thinking about retirement planning, a planner can help you figure out your goals and plan investments and savings to get there. Similarly, if you’re starting a family, you may want to consult a planner about college-savings options. If you shift to a new, higher tax bracket or receive a large inheritance and want to make sure you’re making the most of your finances, you might also consider a planner.
Now, if you do decide to use a planner, do your homework.
Your friend, neighbor, or co-worker might know “a guy” you should see. But it’s vital that you do your own research before choosing the best planner for you and your situation.
The two biggest points to keep in mind are these…
1. Figure out what you want to accomplish and choose the type of planner appropriately.
There are several types of financial planners out there, each catering to different needs. Understanding what goals you want to accomplish will help. Some planners specialize in taxes, others in estate planning or retirement. Still others are more general and can offer guidance across several fields. Make sure to ask about specialization before making an appointment.
As for types of planners, you’ll see Chartered Financial Analysts (CFAs), Certified Financial Planners (CFPs), and Certified Public Accountants (CPAs) – these are the three with the best experience, testing, and continued training from nationally recognized organizations.
Next, do a background check. This is a person you’re going to entrust with lots of sensitive information. I recommend starting with a service like BrokerCheck.
2. Understand your costs.
Some financial planners act on their own and remain apart from bigger brokerages or institutions. Some banks even offer financial-planning services.
There are three common three types of compensation: fee only, commission only, and commission and fee. Fees range from fixed-rate, flat, hourly, percentage, or performance-based. Get a good idea of what you’ll need to pay for different levels of service from your planner.
You also need to know if your planner will receive compensation based on what they tell you to buy. For instance, if your planner works through a brokerage like Fidelity or T. Rowe Price, they may get paid for recommending in-house funds.
Fee structure and conflicts of interest should all appear in the basic disclosures from the planner. If they’re not in there, find someone else.
I’ve said it over and over… No one will take better care of you than you.
That said, we all need a little help sometimes. If you fit one or both of these categories and have the money available to hire a planner, do a little research… instead of blindly going to the guy your neighbor recommended.
Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig
Crux note: Dave says President Trump is about to authorize “bonus checks” that will put $2.3 trillion in the pockets of millions of everyday American investors like you. To claim your payment on this one-day cash event, you must act before the upcoming deadline. Watch this brief video presentation for all of the details.