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Choosing a Financial Advisor

Choosing a Financial AdvisorThere are many reasons why people choose to work with a financial planner.  Maybe you’ve come into a large amount of money and you want to make sure you invest it wisely, or maybe you’ve come upon hard times financially and you need help coming up with a plan that will assist you in getting caught up and getting out of debt or you may have decided that you should start planning for your retirement.  These are just a few of the reasons to seek out the services of a financial planner.

One of the best ways to find a planner is to ask for recommendations from friends, relatives and co-workers that you know have worked with a financial planner.  Once you have a few to choose from you should make an appointment to speak with each one and see which one you feel the most comfortable with and has the skills you are looking for.

Some financial planners hold multiple designations and therefore can assist you in many different areas which may allow you to use one planner instead of multiple people.  There are over 50 different types of planners and they specialize in different areas.  Figuring out what each type of financial planner does can be confusing but hopefully the information below will help clarify them a little.

CPA or Certified Public Accountant – A CPA will be the most helpful when it comes to dealing with tax issues.  CPA’s are accountants that have obtained specific licensing and education requirements.

PFS or Personal Financial Specialist – Is a CPA that has received extra training in financial planning and passed a specialized exam that allows them to hold the title of CPA/PFS.

CRPC or Chartered Retirement Planning Counselor – Has received specialized training in retirement planning and must pass an exam as well as adhere to a very strict code of ethics.

CFP® or Certified Financial Planner – Are required to have a minimum of three years of experience and must pass three exams which allows them to provide assistance in many different areas.  They also have a very strict code of ethics that they must follow.

ChFC or Chartered Financial Consultant – Are usually insurance professionals who have also received extra education and training in investments and economics.

Another important question you should ask while interviewing your potential planners is how they charge for their services.  The following are the most common ways you may be asked to pay for the services you receive.

Flat fee can either be a flat fee for the entire job or a flat hourly rate.  This is typically the best option because you have less worry about dealing with a conflict of interest because the planner will be paid regardless of whether or not you purchase any investments through them.

Commission is how most financial planners make money.  When you purchase an investment they will get a percentage of the sale.  Even though most planners are very trustworthy and work ethically you must make sure that you are not being pressured into purchases you do not need or want.

Asset based fees are becoming more popular and are figured as a percentage of your investments which is then paid to the financial planner yearly.

There is a lot of information that you need to learn and know about your potential financial planner but all of your research will hopefully lead to a comfortable and financially rewarding relationship.