Do You Need A Financial Planner? Here’s How To Tell & What To Look For In A Financial Planner

---

We write about products and services that we use. This page may contain affiliate links for which we receive a commission.

---

A financial planner is a business professional who helps people make plans to be financially secure in their future. 

Services include:

cash flow management

education planning

retirement planning

tax planning

estate planning

While many people may be perfectly capable of managing their own finances, they may not be educated in all aspects, or may not have the time to keep an eye on their money and financial plans.  Those are the times when it makes the most sense to hire a financial planner.

For starters, here are 14 reasons you may need a financial planner.   

Some of the more urgent reasons are:

• blending two families
• getting a divorce
• facing a financial crisis
• the death of a spouse
• a financial windfall

 

Keep in mind, good financial advisors may come at a cost. 

Certified Financial Planners charge a median fee of $100 per hour; $700 for a comprehensive financial plan; $300 for a plan that covers a specific area, like retirement planning.  Source

 

How Financial Planners Get Paid

Some financial planners work based primarily on fees. 

Some charge a fee plus commission on financial gains.

Some charge no fees and are paid commissions based on insurance policies they sell you, as well as investments. 

Some financial planners are paid by financial institutions — such as banks and credit union to assist customers. 

 
There are disagreements as to whether a fee-only financial planner is better than a commission-only financial planner is (because they may be more objective).  That is for the customer to decide. 

An advisor who is honest and straightforward about compensation gives you the information you need to make smart financial decisions. Do not consider hiring a financial advisor who will not disclose how he or she is compensated. Source

 

What Makes A Good Financial Planner?

More important than how your financial planner is paid is how good they are. 

Do they know what they are talking about?  Can they manage your money and have integrity? 

A Marketwatch article about bad financial planners warns customers to do due diligence in finding a financial planner.  You should pay attention to certain key areas, including:

1.  Ask who regulates them.  This will reveal if they are insurance salesmen in financial planners’ clothes, if they sell securities, or if they are regulated at all. (If they’re not regulated, then they would be acting illegally.) 
 
2.  Ask for work history.  A registered investment advisor will have an ADV form with discloses their 10-year work history.
 
3.  Be concerned if they are only interested in selling you one product, or in transferring your investments over to one product.  This means they are large getting commissions for that product. 
 
4.  Determine if they have good character.  The above-mentioned article insists that likeability much less important than competence and integrity when it comes to choosing a financial planner.  Beware of a financial planner who is all charm and no substance. 

Finally, there are a few warning signs about financial planners that you should also be aware of. 

For example, in this CNN Money article, the undercover financial planner says, “If we recommend something, you can be sure it fits in with our fee model … That doesn’t mean your planner shouldn’t make money. It does mean that he shouldn’t pretend he doesn’t try to.”