An Update From My Financial Planner

After posting my earlier blog article about choosing a financial planner, I got the following comment from my planner:

Scott -

The reality of the trillion dollars that is supposed to transfer hands in the coming decade has led a wave of people into the investment and financial planning space. Everyone is getting into the business because of the potential. Because of this, the consumer of these services and products is inundated and confused with all the choices and designations and products.

Too much choice often leads to paralysis and besides, its their hard earned assets and who can you trust anyway.

I've come to conclude the following when I think of how the average person should choose a financial planner;

1 - Designations - There are only a few respectable designations in my mind suited to creating a financial plan: a CFP, RFP and CHLU. There are a few other designations for specialists in divorce CDS and the elderly EPC too although they are in addition to the others. But even individuals with these designations often haven't actually completed and implemented a plan.
So along with designations, you want to ask about experiences and see what a plan involves. The actual planning document is not as important as the implementation of I, so asking a lot of questions about how the plan is implemented and tacked is important.

2 - Compensation drives behaviour - when it comes to investments, a commission approach only works for the do it your selfer - and most individuals are not interested or experienced or have the time to be DIY's.

Paying a fee for the plan and either a flat fee for implementation and management of the assets or a percentage of the market value up to a maximum amount is the only way to ensure the advisor is as interested in your success as you are.

3 - Diversification - If the planner is only recommending managed money (funds or managed accounts) you have to wonder if he/she is really managing risk for their clients. Along with Wills and appropriate insurance, pensions, annuities, and of course investment real estate need to be considered in the mix.

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Thanks, Rich!

... Scott