I’m a strong proponent of fee-only financial planners. Because they operate under a fiduciary duty, by law they must have their clients’ best interests at heart. If you choose a fee-only financial planner, you won’t have to worry about conflict of interest, because they don’t accept commissions based on product sales or their recommendations. Instead, they receive a flat fee for looking at your financial picture holistically and then giving you advice that’s unbiased and independent. Many fee-only financial planners also carry professional designations that hold them to strict codes of professional and ethical conduct. This is the kind of financial help that the average person needs to plan and build for the future.
What should you look for?
- It’s a good idea to check a financial planner’s professional background at the Financial Industry Regulatory Authority (Finra) or the Certified Financial Planner Board of Standards.
- Once you’re satisfied with his or her credentials and experience, you’ll also want to consider your comfort level with the individual. This is critical. You want someone who listens, who makes you feel respected and heard.
- You may also want to choose someone who is “like you” – who has had similar life experiences. For example, if you are looking for a financial planner because you are going through a divorce, you may be more comfortable choosing someone who has been through a divorce and understands the issues on a personal level.
How can a financial planner help you?
Many people assume that if they don’t have a lot of assets to invest, a financial planner can’t help them, but the truth is, financial planning is about a lot more than your investments. It’s about strengthening your financial picture and building a secure future – and that covers a lot of ground.
- Getting unstuck. Many clients tell me that simply having an expert at their back defuses their anxiety and gives them the confidence to move forward and deal with their money. Many people put off dealing with their money for fear of making a mistake or being judged. Knowing you have someone on your team to help you course-correct if needed is hugely empowering.
- Prioritizing your next steps. A financial planner can help you understand your financial picture and identify the most important next steps you should take to improve your situation – for example, paying down your credit cards or building an emergency fund. Everyone’s situation is different, and taking the guesswork out of the equation lets you focus your time and energy on what will benefit you most.
- Protecting what you have. A financial planner can help you do an insurance checkup once a year to make sure your assets and future are adequately protected from liability. Remember, dealing with your money is about protecting what you already have, not just growing your bank balance.
- Navigating life transitions. A financial planner can help you navigate the financial implications of big life transitions, such as a new baby, divorce, or a career change. It’s very easy to ignore financial issues when your life is in flux, but the choices you make at these times can have long-term consequences on your financial wellbeing. Get help and make the best possible decisions.