Questions You Should Ask When Choosing a Financial Planner

A financial planner can play a vital role in helping you reach your financial goals. Financial planners guide their clients in a variety of ways including retirement planningwealth management and offering insight and advice on a range of topics. This can include basic budgeting, setting short-term and long-term financial goals, reviewing potential insurance needs and comprehensive financial planning. Here are some questions you should ask when selecting a financial planner to help ensure your choice best meets your specific needs. 

Why do I need a financial planner?

First, ask yourself what type of help you are looking for. Maybe you are in the middle years of your career, have a family and are looking to plan for college funding for your children. Maybe you want to purchase a vacation home in the near futureIf you are in the later stages of your career, you may want some help determining how far-off your retirement is. Perhaps you are ready to stop working and want to know if you have saved enough to retire a little early to spend time with your grandchildren, or maybe you have just retired and want to know if it is within your means to spend the next few years traveling to the exotic locations on your bucket list. Are you looking for investment help with your IRA, old 401(k) or brokerage account, or did you just inherit some money from a loved one and want to ensure it is invested wisely? 

A successful relationship with a financial planner can be long-lasting, and your financial planner will be involved in some of the most personal financial decisions you make over the years. You need to be able to trust their advice, and while ultimately your financial decisions will be yours to make, you want to be able to make those decisions with the best information available. Building a good relationship with your financial planner is key. You will want to work with someone who takes your questions, concerns and suggestions seriously and who will provide you with honest feedback and guidance. 

What services does the financial planner offer? 

Does the financial planner offer comprehensive financial planning, and what does that entail? If you are looking for a financial plan, discuss the steps in the financial planning process, and be honest about your situation and goals. Ask about the technology the financial planner leverages and why he or she chose that software. Ask to see an example of a financial plan deliverable and inquire about the assumptions used in the plan like inflation, life expectancy and how investment returns are modeled. Inquire about how the relationship will proceed after your initial financial plan is delivered and what the next steps will be to successfully implement the plan in the coming years. 

If you are interested in asset management, ask questions about the firm’s investment philosophy. Does the firm have an investment management team, or will the financial planner be choosing the investments for your portfolio?  What investment models does the firm offer, and which benchmarks does it use to measure success? Discuss your investment time horizon and how that could impact your investment goals and the degree of risk you are willing and able to take to achieve those goals. Before investing your assets, your financial planner should have you complete a risk tolerance questionnaire to help determine how your assets should be allocated. You should have an in-depth conversation about the results of the questionnaire, so you have a good understanding of why your assets will be invested in a particular allocation. 

What are the planner’s qualifications? 

Talk with the financial planner about their experience and qualifications. Does the planner have expertise in a certain area that could benefit your unique situation? Does the planner work with other clients who are in a similar position as yourself? How will you be able to leverage the planner’s experience to provide the best outcome to meet your goals? Find out what other resources the planner has access to that can add to the value of the relationship. If the financial planner has professional designations such as the CFP® or CRPC®, discuss how that knowledge adds value to the services the planner offers. Inquire if the financial planner you are considering is associated with registered investment advisor (RIA) or a broker-dealer. There are several distinctions between the twoand a main difference is RIAs are required to act in a fiduciary capacity, which means they must act in their client’s best interests. 

How is the planner compensated? 

Financial planners are compensated in a number of ways and use a variety of fee structures. This can include flat and hourly fees for planning and advice and asset management fees. It is important to have an honest discussion and fully understand how your financial planner will be compensated if you decide to move forward with the relationship. 

Know the difference between fee-only and fee-based financial planners. A fee-only planner is paid directly by his or her clients and does not receive commissions for products sold. A fee-based financial planner is paid by clients but can also receive commissions for financial products the client purchases. Fee-only financial planners act as fiduciaries. Fee-based financial planners are required only to recommend products that are suitable for their clients. 

You also want to be clear on what your all-in costs will be when working with a financial planner. You should understand the difference between the fees you will be charged for assets under management and fees you will incur for holding certain assets. For example, a financial planner may charge you 1% annual fee to manage your assets, and if your portfolio consists of exchange traded funds (ETFs) or mutual funds, the firms that manage those funds will also charge management fees. These fees are deducted by the fund company, and you usually will not see them on statements, because they are handled in-house. You pay your financial planner to manage your portfolio, and fund companies charge fees as part of the normal operations and maintenance of the funds they manage. 

How will the relationship be structured? 

Ask the financial planner how often he or she meets with clients. Is it quarterly? semi-annually? annually? How accessible will the planner be if you have questions? Who will be your main point of contact? You want to be clear with the financial planner about your expectations and goals for the relationship. 

It is also a good idea to have the financial planner you are considering explain some financial concepts to you. This will not only help you gauge their knowledge, but it will also demonstrate if they are willing and able to break down important information in a way you can follow and understand. Whether you are looking to work with a financial advisor in the California Bay Area or are looking for a Houston wealth management firm, Insight Wealth Strategies can help. We offer comprehensive, holistic planning that takes all aspects of your life into account.

Insight Wealth Strategies, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Insight Wealth Strategies, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Insight Wealth Strategies, LLC unless a client service agreement is in place. 

Insight Wealth Strategies, LLC (IWS) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.