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Finding The Right Financial Planner – What Do You Look For?

By: Tamara Smith
October 2009

We all work hard to attain some level of financial well-being for ourselves and our loved ones. We save where we can, build a nest egg, and achieve some level of success, but at some point it becomes clear that saving may not be enough. Whether it is looking at your retirement lifestyle, purchasing a new home, building an inheritance for your children, or generating a safety net should you experience permanent disability, your savings may well look paltry against your list of life goals. Using one simplified tactic such as wise investing to meet all of our life goals is simply not going to suffice, nor will efficient money management.

When we arrive at the realization that our financial situation is more complicated than we may have thought, we often look for help – an expert who can offer us a strategy, a plan per se, to help us navigate the realities of our lives and financial circumstances, leverage opportunities, and minimize risks and unnecessary costs.

Set Of Tactics

This is where a financial planner becomes paramount. A financial planner is more than an investment advisor, an insurance advisor, or a debt counselor. Financial planning is more than a set of tactics. Financial planning is a process that determines how you can best meet your life goals through the proper management of your financial affairs.

The key to effective financial planning is for your planner to have the ability to take into account all relevant aspects of your financial situation (‘the big picture’), and to identify and analyze the interrelationships among sometimes conflicting objectives. This unique integration of knowledge and skills across a broad range of topics distinguishes professional financial planning from other related financial advice. This requires the skills of a competent and ethical expert.

So how can you recognize a truly professional financial planner? What due diligence should you do to ensure you are hiring a professional planner who will act in your best interests?

Financial planning is not regulated in most provinces. This means that anyone can call themselves a ‘financial planner.’ Not everyone who refers to themselves as a planner is indeed qualified. Many individuals calling themselves financial planners are licensed to sell products, but have no financial planning training or expertise. In the absence of government regulation, it is important to ensure your planner is qualified, certified, and held accountable for their activities.

Right Financial PlannerAttain Your Goals

 Whether you are already working with a financial planner or you are looking to hire one, the following questions are a great way to determine if this is a financial planner who you can trust and work with to attain your goals:

  • What are your qualifications?

Financial planning is a detailed, comprehensive process. It requires hands-on experience and a strong technical understanding of topics such as personal tax planning, insurance, investments, retirement planning, and estate planning – and how a recommendation in one area can affect the others.

Don’t be intimidated by the alphabet soup behind a planner’s name. Some credentials can be earned over a weekend while others require years of rigorous study and experience. Ask the planner what their qualifications are to offer financial advice and if, in fact, they are a qualified financial planner. Ask what training they have successfully completed. Ask what steps they take to keep up with changes and developments in the financial planning field.

Ask whether she holds any professional credentials, including Certified Financial Planner (CFP) certification, which is recognized internationally as the mark of the competent, ethical, professional financial planner.

  • What experience do you have?

Experience is an important consideration in choosing any professional. Ask how long the planner has been in practice, the number and types of firms with which he has been associated, and how his work experience relates to his current practice. Inquire about what experience the planner has in dealing with people in similar situations to yours and whether they have any specialized training. Choose a financial planner who has at least two years experience developing plans for individuals regarding their financial needs.  If you have specialized needs, look for someone with that expertise.

  • What services do you offer?

The services a financial planner offers will vary and depend on her credentials, registration, areas of expertise, and the organization for which she works. Some planners offer financial planning advice on a range of topics, but do not sell financial products. Others may provide advice only in specific areas such as estate planning or taxation. Those who sell financial products – such as insurance, stocks, bonds and mutual funds – or who give investment advice, must be registered with provincial regulatory authorities and may have specialized designations in these areas of expertise.

  • What is your approach to financial planning?

The types of services a financial planner will provide vary from organization to organization. Some planners prefer to develop detailed financial plans encompassing all of a client's financial goals. Others choose to work in specific areas such as taxation, estate planning, insurance, and investments. Ask whether the individual deals only with clients with specific net worth and income levels, and whether the planner will help you implement the plan they develop or refer you to others who will do so.

Ask if they will provide you with a copy of the financial plan for your records. You will want to refer to it from time to time and revise it as personal circumstances change.

  • Will you be the only person working with me?

Financial planners often work with other professionals, such as lawyers and accountants, and it is also quite common for a financial planner to work with others within their organization to develop and implement financial planning recommendations. You may want to know more about the team who will be working on your file.

  • How will I pay for your services?

Your planner should disclose in writing how she will be paid for the services she will provide. Planners can be paid in several ways:

    • Commissions: The planner is compensated if you purchase financial products to implement a financial planning recommendation. In some cases, the commission is paid by the suppliers of financial products such as an insurance company. In other cases, you pay the commission, for example, if you buy shares of a publicly traded company. Commissions are usually a percentage of the amount you invest in a product.
    • Salary: The company for which the planner works pays the planner a salary. The planner's employer may get its revenues from fees paid by clients such as yourself or in commissions paid by clients making a purchase or by the suppliers of financial products.
    • Fee-for-service: Planners paid on a fee-for-service basis may charge an hourly rate, set a flat rate for a specific service or be paid a fee based on a percentage of assets. In some cases, compensation would be a mix of fees and commissions. You should also ask if the planner or organization receives any benefit other than commission, such as advertising and promotion subsidies, from suppliers of financial products.

Some planners may be compensated by a hybrid of the above methods. Ask if you do not understand the structure. Do not be intimidated into accepting a bill you do not understand.

  • How much do you typically charge?

While the amount you pay the planner will depend on your particular needs, the financial planner should be able to provide you with an estimate of possible costs. Such costs would include the planner's hourly rates or flat fees or the percentage they would receive as commission on products you may purchase as part of the financial planning recommendations.

  • Could anyone besides me benefit from your recommendations?

Ask the planner to provide you with a description of their conflicts of interest in writing, for instance, any business relationship with the companies or ownership interest in any company that supplies financial products sold by the planner and the planner's employer.

  • Are you regulated by any organization?

Financial planners who sell financial products such as securities and insurance or who provide investment advice are regulated by provincial regulatory authorities and may also subscribe to a code of ethics through a professional association. Others who are members of the accounting and legal professions are usually members of professional bodies that govern their fields. Planners who hold CFP certification are subject to the ethical, practice, and competence standards established and overseen by Financial Planners Standards Council (FPSC), and are also subject to FPSC’s disciplinary review policies.

It is a fair question to ask if they have ever been the subject of disciplinary action by any regulatory body or industry association. If they claim to hold CFP certification, verify if they are in good standing with FPSC by looking them up on FPSC’s website (www.fpsc.ca).

  • Can I have it in writing?

Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference. This is a standard and required practice for CFP professionals.

In light of the recent high-profile fraud cases relating to financial advisors using fraudulent activities to lure investors out of their life savings, it is important to remain vigilant. If the offer seems too good to be true, it probably is. Allocating significant life savings to an individual whose 'promise' is based on a vaguely defined approach, or exclusively focuses on investment returns and is not appropriately tailored to your personal circumstances, is limiting both in the potential to meet one's life goals and in enhancing financial well-being. Consider this approach a red flag.

Unique Goals

A professional financial planning approach with a qualified and ethical planner will align investment decisions with other relevant financial planning considerations and strategies to meet a client's unique goals and circumstances.

To learn about financial planning and working with a financial planner, go to fpsc.ca for more information including a ‘Find a CFP Professional Tool,’ which will help you find one of 17,500 CFP professionals working in Canada.

Tamara Smith is vice-president, marketing and brand management, at the Financial Planners Standards Council (FPSC) a not-for-profit organization dedicated to ensuring Canadians' financial planning needs are well served by developing, promoting and enforcing professional standards for financial planning.

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