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Who Can You Trust

If you’re someone who knows nothing about cars, you know how nerve-wracking it is to find a mechanic you can trust. After all, if you don’t know the first thing about auto repair, the chances of getting taken advantage of are high. Consumer advocates tell us to take special care to review the shop’s estimate, get a second opinion, and not let talk of replacing alternators and turning rotors confuse us into surrendering our wallets. It might take a while, but eventually you’ll find a mechanic you can rely on. And even when you receive a referral from a friend, you’re still obligated to perform your due diligence to ensure you’re not being ripped off.

If you thought that was an arduous process, try looking for a financial planner. Besides not having enough education on investments and financial planning concepts to make informed decisions, most Americans are inherently skeptical about anyone wanting to help handle their money. We can’t help but wonder what’s in it for the financial planner? Are they going to take their fee or commission and disappear? What kinds of services should we expect from a planner?

Regardless of whether or not your planner is securities licensed or strictly an insurance agent, there are some basic services every planner should offer clients:

  • Asset allocation strategies
  • Determine financial goals and objectives
  • Confront estate and healthcare concerns

Of course, your planner may not be qualified to provide estate planning services, or to secure healthcare insurance, but he or she should demonstrate an interest in all aspects of your financial plan and be willing to provide referrals to planners who specialize in these areas. Once you connect with a financial planner, you must then be willing to ask several questions to ensure he or she is not only competent, but also trustworthy. Here’s what you want to know about any planner offering assistance:

  • Education and experience
  • Licenses and registrations
  • Professional membership organizations
  • Products and services offered
  • Any lawsuits or disciplinary actions

With regard to education and experience, make sure you know how informed your planner is. How long have they been in the business? Are they continuing their education? Have they only focused on one area of financial planning? Licenses and registration relates to what types of services the planner can offer. For example, is the planner licensed to sell securities, insurance products, or both? Are the planner’s licenses completely up to date in the state in which he or she practices? Professional Membership Organizations are entities that require the planner to meet certain criteria. For instance, a Certified Financial Planner or CFP is a financial planner who has completed certain training courses and met the standards set forth by the Certified Financial Planner Board of Standards. The Financial & Health Research Institute requires its members to undergo criminal background checks and a comprehensive credit review, as well as adhere to a strict code of conduct and meet other qualifications.

Finding out what kinds of products and services a planner offers will help you determine how he or she is compensated. Why is compensation important? You’ll want to know how your planner earns an income, as it may effect how you weigh advice. There are three different ways a planner can earn money:

  1. Hourly-based fees or fees based on a percentage of assets or income.
  2. Commissions paid by the company whose products the planner recommends.
  3. Combination of fees and commissions.

Another question you need to ask relates to disciplinary actions or lawsuits. You can always ask the planner if he or she has been subjected to any of these types of actions, or contact the National Association of Securities Dealers (NASD) and state insurance department for more information. And, if the planner is a member of any professional organizations check to see if they have conducted background checks or credit reviews. You wouldn’t take auto repair advice from someone who drove a car that kept breaking down, right? Then why place your assets in the hands of someone who can’t manage their own finances?

After all is said and done, and you have found a planner that meets your qualifications, there is one last question to ask yourself: is this someone I want to work with? A planner can have all the experience and all the ethics, but if you are not comfortable discussing your financial plan with him or her, keep looking. Getting along with a planner is a critical aspect of your decision. A good planner is not going to come over, fix a few problems, and disappear. Financial planners must play an integral role in the financial decisions we make throughout our lives…So you will have to remain in contact. If you don’t care for the person why would you want to stay in touch? And don’t be afraid to change planners. Anything that makes you less engaged with your planning could prove disastrous to your financial well being. If your planner isn’t keeping in communication with you, maybe it’s time to find another more willing to give you the attention you deserve.

“I find that many of the clients I deal with have an inherent aversion to financial planners and planning, in general. Still more are unsure whether their level of assets require the assistance of a licensed professional, at all,” says Lisa Brumfield, President of her own financial planning firm in Southern California. Lisa’s observation illustrates one of the other disconnects existing between average Americans and financial planning. Making the choice not to seek professional help regarding your finances because you don’t believe your assets rise to the level of warranting such help is a dangerous, potentially destructive decision. It’s like when my mother diagnoses her own medical problems. She’s not an expert, and dismissing an ailment because she believes it’s harmless, doesn’t automatically make it so. Always err on the side of caution…There’s a lot of planning that can be done regardless of your asset level.

When I was looking for a planner I had the same feeling I had when searching for a mechanic–I was afraid I was going to be taken advantage of. That feeling should never be an obstacle to getting the help you need. There are people you can trust out there…You just have to know what to ask.