Do You Need a Financial Advisor?

Before you hire a financial planner, be sure you really need one. There are many different types of financial advisors, specializing in various areas of money management. It is essential that you identify your needs so that you can seek the right type of advisor at the best value.

Certified Financial Planners (CFPs) have finished a two-year course and successfully passed comprehensive exams with the College for Financial Planning. They can offer tax planning, estate planning, portfolio management and insurance advising. While some planners earn all their income from commissions, others charge a fee, which can range from $50 to $200 an hour.

Chartered Financial Consultants / Chartered Life Underwriters (ChFCs/CLUs) have finished a three-year course with the American College. They can offer services in tax, estate, insurance, financial and investment management. Insurance agents (or life underwriters) are licensed by the state.

Certified Public Accountants (CPAs) often offer financial services. Those with the Personal Financial Specialist designation have at least 250 hours of yearly experience in financial planning and have passed an exam. If you have a fairly simple and straightforward tax return to prepare, you may get all the help you need from a tax preparer. Preparers, such as those employed by H&R Block, do not have the training that a CPA does, but they also charge far less for their services. Enrolled Agents (EAs) work exclusively in the field of taxation. In addition to preparing your return, EAs can help with tax planning, represent you at audits, and negotiate with the IRS on your behalf. Referrals to EAs in your area are available through The National Association of Enrolled Agents at 1-800-424-4339.

Certified Consumer Credit Counselors (CCCCs) are certified by the National Foundation for Consumer Credit and offer assistance with budgeting and basic money management, as well as advice on how to get out of debt and how to use credit wisely. If your needs are basic, a credit counselor can be a smart choice, since many offer their services free of charge through a Consumer Credit Counseling Service agency.

Brokers are registered representatives that buy and sell securities on behalf of their clients for a commission. Many financial planners are also brokers for one or more investment firms and earn a commission on the sale of investment products.

Choosing A Financial Planner

If you decide to hire an advisor to help you get your finances in order, do your homework first. Financial planners generally earn their money in one of two ways: through fees they charge or commissions they earn from the sale of financial products. Some advisors use a combination of fees offset by commissions.

When interviewing a financial planner, be sure you are comfortable with his or her answers to the following questions:

  • How are you compensated?
  • What education, credentials, and experience qualify you to be a financial planner?
  • What is your typical client like?
  • Do you have a list of clients I can contact as references?
  • What areas will you cover during the initial session? Will I receive a written action plan at the end of each session?

A good financial planner can provide an invaluable service. Such an advisor can offer an objective viewpoint on your financial situation. He or she can guide you in setting realistic goals and provide advice and encouragement along the way. Any planner should be willing to spend time answering your questions. A financial planner can also save you money on investment fees, can make your money grow as a result of wise financial decisions, and can give you peace of mind.

Referrals for certified financial planners (CFPs) are available through the Financial Planning Association (800-282-7526).

Another organization that will make referrals to CFPs and Chartered Financial Consultants (ChFCs) is the International Association of Registered Financial Consultants (800-532-9060). For people preferring to deal with advisors who charge a fee only, the National Association of Personal Financial Advisors (800-366-2732) will provide a list of its members in your area.

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