Guide to Choosing the Right Financial Planner

As we grow older, our financial (and life) matters get more complex. In addition, with all the financial advertising and options now available it is hard to sometimes figure out what your best current and future choices are. Do we only focus on retirement - will I have enough at retirement? What about enjoying life now? How will we pay for the kids schooling? The list goes on. One of the things I am doing to help get me through this financial maze is to seek the advice of a financial planner. However, even finding a good financial planner takes some work. Here are some points to consider and questions to ask that can help you select the right financial planner. It's important to feel confident about your choice, so take your time and meet at least 2-3 planners before choosing.

How to choose a planner?

All practicing financial planners must be licensed, but it's sensible to look for one who is also a member of a professional association – the FPA is the peak body for financial planning in Australia. All FPA practicing members are committed to a code of ethics and rules of professional conduct, over and above what is required by law.  Even though they are licensed, you must take the time to screen planners carefully to be sure that the person you hire is knowledgeable, competent, and reliable. The time and effort that you put into this task will be well worth your investment.

Before interviewing any advisers, be sure you are clear about what services you need. You might want to focus on one aspect of your financial future, such as retirement planning, or you may need a comprehensive package that includes all aspects of your financial future.

To get started, you will need to collect the names of advisers in your area. Find some names through recommendations from friends and colleagues, your accountant or other professional providers you deal with, or contact the he Financial Planning Association (FPA) referral service. One recommendation - avoid using a friend or family manner as your financial planner. If things don't go as planned it can adversely affect relationships.

What financial planners charge?

Financial planners generally charge one-time, or set, fees or hourly fees, work on commission, or charge a combination of fee and commission. Find out what the financial planners you are considering charge before you agree to work together. The fee arrangement affects what you'll pay, of course, but even more important it can affect the quality and reliability of the advice you'll be given.

Hourly rates can range from $50 to $400, depending on the planner and the area of the country in which you live.

One-time, or set, fees that cover the entire cost of a financial plan can range from $500 to $10,000, depending on the amount of work that is required.

Commissions are fees earned from the sale of certain financial products. For example, if a planner works with you to buy or sell stocks or other investments, the fee would be a percentage of the investment value. They could also get commissions based on how many products/plans they sell from a particular company - thereby making them more biased towards a particular product or company.

Again, find out what the financial planner's fee is before making your first appointment to work together. Remember the old adage, you get what you pay for, that is why I recommend someone who does not rely on commissions as their main source of fees. If they are pushing a product or financial company too hard that should be a red flag and not a association worth pursuing. They should be considering your needs first.

Some Questions to ask when interviewing a financial planner by phone

To get an overview of a prospective planner's services, ask a few basic questions by phone. This will also mean you won't unnecessarily pay in-office consultation charges for someone you may not work with. If an adviser seems right, you can schedule an in-person meeting to ask additional questions. You might ask the following questions during a phone interview:

- How do you charge for your services? If you are looking for an entire overall financial plan, then a planner who charges a set fee might be best for you. If you plan to focus on just one part of your finances, such as college savings, you should look for a planner who will charge an hourly rate. A planner who is also an accountant or a lawyer is likely to charge a higher rate. Be sure to find out exactly what will be included for the fee.

- Do you have a minimum net worth or income requirement? Some financial planners only work with individuals whose financial means are large.

- Do you work for yourself or are you part of a firm? If you choose a planner who is part of a financial-planning firm, you may also deal with other staff members. A firm is likely to have resources and expertise to complete your plan quickly. Many planners work on their own or with one or two associates. If you are looking for a long-term relationship, ask what will happen if your planner leaves the firm.

- What is your experience? What areas do you specialize in? Many planners have backgrounds in business and finance. It's a good idea to choose someone with at least five years' experience who has worked with clients with needs similar to your own.

- How many clients do you have and how long have you had them? Shows their track record.

- Does the organisation have expertise in investment research and superannuation issues?

- Do they provide an ongoing portfolio review service?

- What training does the organisation provide for its planners? Companies that invest in their own staff tend to have better people.


Meeting the planner

After talking to prospective planners by phone and reviewing any materials you received by mail, you may want to choose two or more to meet in person. When scheduling a meeting, ask what information he might need from you, and ask him to provide names of references for you when you meet. Most advisers will meet without charge for up to an hour to explain their services (make sure you confirm this before going to the meeting)

When you meet with the planner, consider asking the following questions:

> What will the planning process involve? Find out how many times you will meet, what information you will be expected to provide, and when your final plan will be completed. If the adviser is part of a firm, ask who else you will work with and how you can best use the firm's expertise.

> What will you include in the financial plan? Can I implement the recommendations on my own? The written plan is the final document you will take away. You will want it to be as complete and specific as possible so that you can use it as a guide in making investment or insurance choices. Many advisers offer investment management services at an additional cost. Be wary of an adviser who only recommends investments on which she earns a commission.

> Can you give me references of clients who have had financial-planning needs similar to mine? You will want an adviser who deals with people with needs similar to your own. Ask for references and call each one. Ask if the planning was helpful, what it was like to work with the adviser, and whether the person would use this financial adviser again.

> Always make sure you are given their Financial Services Guide – a legal requirement that sets out information about the adviser, the services they offer and their charges.


Making the decision

Compare the results of your meetings and don't hesitate to call back with more questions. Look for someone who speaks clearly without using jargon, is good with numbers, and quickly understands your goals and financial situation. You will want to choose someone you'll be comfortable working with for many years in shaping your financial future.

Finally, after you have interviewed the planners and checked their references, call the FPA or ASIC offices to find out if any complaints have been made against the planners you are considering.

There is an excellent guide from FPA/ASIC (the bodies who licences planners) can provide you with more detailed information : http://www.fpa.asn.au/files/PubGettingAdvice.pdf. Their site contains a lot of useful information on this topic as well.