5 questions to ask when looking for a financial planner

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In your life, you’re the hero. And no matter how successful you are, it often helps to have a guide.

A financial planner can be a guide in your life, helping you problem solve when you’re stuck. Finding the information you need, but can’t get yourself. Nudging you in the right direction. And providing tough love when you’re not following through on what you say you want to be doing.

But how do you choose one? How do you know who is right for you? Start by asking any planner you meet with these questions:

1. Are you a fiduciary and what training and credentials do you have?

A fiduciary is someone legally obligated to act in your best interest. Every attorney is a fiduciary. Yet, the title “financial planner” is not regulated at all. Anyone can refer to themselves as a financial planner, but that doesn’t make it so. The first question you should ask is “Are you a fiduciary?” The answer should be “Yes, and I’m happy to sign a fiduciary oath pledging to adhere to this standard at all times in our work together.” If the answer is long, convoluted, or otherwise less than forthright, keep searching.

After confirming this person will work in your best interest, ask about their training. Being a CERTIFIED FINANCIAL PLANNER (CFP®) professional is generally considered the gold standard, and requires passing 6 courses, completing a capstone project, passing a rigorous exam, and having 2-plus years of experience.

The person may respond with talking about having passed the Series 6, Series 7, or Series 63. These are sales licenses, but they do not require completion of coursework or any training in financial planning. Just because someone is licensed to sell you something doesn’t mean they’re trained to help guide you.

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2. How do you make money and how much are we paying you?

Financial planners make money in different ways. Even once you weed out the salespeople masquerading as financial planners, and have ensured that your planner is a fiduciary, planners may charge differently depending on who they are serving. Generally, the charges fall into three categories:

Billed as a percent of assets under management

The most common model is for a planner to bill a percentage of the money they manage on your behalf. This fee is often around 1 percent of the account, though it can be higher or lower depending on a few variables. One percent may sound small, but if you have $500,000, you’re paying $5,000 each year. That may be well worth it, but make sure you know in dollars how much you’re paying to your advisor.

Hourly rate

Some planners charge an hourly rate. The benefit is you know exactly the hourly rate and pay specifically for what you need when you have a question, and no more. The downside is that you may hesitate to bring a question to your financial planner, or not even realize you have a question that needs answering, because it’s a purely transactional relationship. This works well if you’re very confident in managing your finances and only have occasional questions for an expert.

Flat-fee or retainer

An increasingly common fee model is for planners to set a flat dollar amount and charge that fee to clients each year, or sometimes broken into quarterly or monthly payments. (Disclosure: This is how my business makes money.) In this model, you have an ongoing relationship with an advisor, and usually, don’t get charged more if you reach out with a question. The dollar amount is clear and you’re not worried about reaching out with a question here or there.

Any of the fee models can make sense depending on what you’re looking for and your unique financial situation, but make sure you have clarity on exactly what you’re paying and how you’re paying it before you sign on.

3. What types of client do you specialize in working with?

If you’re training for a marathon, you don’t hire a former bodybuilder as your personal trainer. If you’re having foot pain, you want to see a podiatrist or an orthopedist, not a cardiologist. Similarly, don’t assume someone is the right planner for you just because they have the CFP certification and will sign a fiduciary oath.

Some planners specialize in working with early to mid-career women in tech. Others may specialize in the unique planning circumstances of LGBTQ couples. Others know everything there is to know about federal employee retirement benefits. Knowing exactly who your financial planner works with most often will let you know how well equipped they are to handle your specific situation.

Student loans are a prime example. Many great financial planners don’t know much about student loans because they primarily work with clients nearing retirement. Likewise, if your planner specializes in working with young professional couples, they’re likely not an expert in Social Security strategies.

Planners who have a narrower focus often have deep expertise in the situation you’re bringing them. They’ve seen 15 other clients who share your scenario in the past year, so they know the questions to ask and pitfalls to watch out for. Being a CFP® is great, but it shouldn’t be the only hurdle a planner clears before you decide they’re the right planner right for you.

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4. What’s the value of having a financial planner?

Most people initially reach out to a financial planner because they have a specific question burning in their brain. Questions like:

Those questions are great starting points. But they’re only a starting point. Often times, you may have other questions that you’re thinking about which don’t have hard and fast answers. Questions that are vexing and emotional, such as:

  • We just got married; how should we go about sharing money and combining our financial lives?
  • I’m suddenly making more money than I ever thought I would, and it’s producing a lot of anxiety because I’m worried I’ll mess it up. How do I not screw this up?
  • We’ve established great fundamentals with an emergency fund, no debt, and maxing out retirement accounts. What comes next?
  • How do I balance saving enough for the future, but not deprive myself too much today?
  • My partner grew up with a lot of money. I didn’t. We often see money really differently. It’s a strain on our relationship. How can we get on the same page and have a healthy system of shared finances?

Some planners stick to the first list and don’t get into the second. That’s fine if that’s what you’re looking for, but it won’t suffice if you’re seeking an outside partner to help you make decisions and feel comfortable with those decisions. Make sure you know whether your planner believes in spending time discussing all the emotions and values that influence our money decisions. If that’s what you’re seeking and your planner sticks only to the spreadsheets and calculators, it’s time to seek another planner.

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5. What can we expect of you in a given year?

Planners have wildly varying businesses and service models. Some planners work entirely virtually and never meet in person. Others will only meet in person. Some schedule quarterly meetings, whereas others are only annually, and some just say “call if you need me.” Some financial planners have 50 clients, but others may have several hundred, and this affects the level of depth they get into with you. Some are happy to text you reminders of your financial to-do list, but others keep strictly to phone calls and meetings. You should have a clear idea of how much contact you should expect from your planner, what tasks they will help you within a given year, and what questions they can help you solve.

Choosing a financial planner shouldn’t be done lightly. Your financial planner will likely know more about you than some of your closest friends or family members. We don’t often disclose our income, debts, or net worth to our friends, but we dive right into those with our financial planner. Even more, you may be talking about how you experienced money as a child or the ways in which money presents tension between you and your partner. Before agreeing to work with someone, make sure you’ve done the research to know not only that they have the technical expertise, but also that you’ll be comfortable sharing such personal information with them.

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Ryan Frailich, a CERTIFIED FINANCIAL PLANNER™ professional, runs Deliberate Finances, a fee-only financial planning firm which specializes in helping young couples and educators plan for their financial lives. When not working, Ryan is exploring New Orleans, running with his dog Dodger, or building block towers with his young son. Opinions are his own.

Haven Term is a Term Life Insurance Policy (DTC 042017 [OK1] and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. Policy and rider form numbers and features may vary by state and may not be available in all states. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Our Agency license number in California is OK71922 and in Arkansas, 100139527.

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