Learn about Financial Planning Professionals
Are there different types of financial service professionals?
Financial professionals are not all the same; each provides a unique service. Here are descriptions of financial service professionals and how their roles work together.

Financial Planner A financial planner, such as a Certified Financial Planner professional, manages your finances to help you meet your life goals. A planner can provide comprehensive service that includes advice in areas such as budgeting, saving, taxes, investments, insurance, estate planning and retirement planning. Or, the planner may work with you on a single financial issue within the context of your overall situation.

Accountant Maintains financial records and helps you prepare and submit tax returns. May also offer tax-planning advice to minimize the future tax bite of your financial decisions.

Attorney Provides legal advice and prepares relevant legal documents. Attorneys can set up trusts, draft wills and powers of attorney. Also, depending on their area of specialty, they can prepare or review business succession and buy-sell agreements, or create sophisticated estate plans. Some attorneys specialize in tax advice and tax planning.

Insurance Agent Sells life, health, property, casualty and other insurance products to protect you and your financial assets from risk.

Investment Adviser Helps develop investment goals and plans, selects appropriate investments and monitors their performance. An investment adviser may hold any of the job titles above, but must be registered with the Securities Exchange Commission (SEC) or state securities agencies to provide advice.

Stockbroker Handles orders to buy and sell securities products such as stock, bonds and mutual funds. Brokers must be properly registered with the NASD. (National Association of Securities Dealers)


How can a financial planning professional help me?
A financial planning professional can help you work toward a specific financial goal such as funding for your child's college education, deciding whether to retire early, or reducing your tax burden. Or, a planner can analyze your overall financial picture and develop a comprehensive plan to meet your short and long-term needs focusing on areas such as taxes, estate and retirement planning, investments and insurance. Many planners can also help you manage your investment portfolio on an ongoing basis.

Whatever your needs, the relationship between you and your financial planner should be an ongoing one, including periodic review of any plan or strategies you have chosen.


When should I consider using a financial planning professional?
Financial planning is crucial to determining how your financial strategies will help meet your short and long-term financial goals. Often, a specific event will trigger the need for professional financial planning guidance. You may benefit from working with a planner if you:

  • want to assess your overall financial profile
  • change your marital status
  • receive a large sum of money
  • experience the death of a spouse or other close family member
  • change employer-sponsored retirement plans
  • sell a major asset such as a business or a piece of highly appreciated real estate
  • are concerned about estate taxes
  • need help creating a savings plan for your children's education
  • want to make sure you are prepared for retirement
  • want to make sure your income would be protected in the event of death or disability
  • want to diversify your investments to protect against a market decline
  • have a baby or adopt a child


How are financial planning professionals compensated?
Before you enter into a relationship with a financial planner, make sure you understand how he or she will be compensated for their work. The planner should provide you with this information prior to starting a working relationship with you. The compensation arrangement may differ depending on the individual services requested.

There are several commonly accepted methods. Different planning situations, lifestyles, and age levels have a major impact on every individual's decision to engage and compensate a financial planning professional.

Fee-only: The planner is compensated entirely from fees for purposes of consultation, plan development, or investment management. These fees may be charged on an hourly or project basis depending on your needs, or on a percentage of assets under management.

Commission: Compensation is received from the sale of financial products, which you agree to purchase in order to implement financial planning recommendations. Professionals should be specific with you as to the source of the commissions (stocks, mutual funds, insurance policies, etc.) and should be exact as to the amount they receive from each source.

Combination fee/commission: A fee is charged for consultation, advice and plan preparation on an hourly, project or percentage basis. If you choose to implement your plan through this type of planner, he or she may receive commissions from recommended products targeted to achieve goals and objectives.

Salary: Some planners work on a salary basis for financial services institutions such as banks, credit unions, and other related organizations.
No matter how a planner is compensated, you should request information on any real or potential conflicts of interest. In addition to commissions received from any financial product sales, you should ask whether there are outside incentives or bonuses the planners gain for certain recommendations.


What questions should I ask prospective financial planning professionals?
How do you find the financial planner right for you? Here are eight tough questions to ask prospective planners.

  • What credentials, licenses, and education do you have?
    Most qualified financial planners have a four-year college degree. Beyond that, the prospective planner should have completed an advanced education in financial planning, such as the widely respected Certified Financial Planner program. Because investment advice is often involved in planning, the financial planner should maintain a securities license or be a Registered Investment Adviser. This registration requires the planner to fully disclose his or her background and methods of doing business.
  • What is your work experience?
    Look for previous work experience in the financial services area such as a stockbroker, insurance agent, real estate agent, banking, law, or accounting. Ask them how many years they have been financial planners. Certified Financial Planner licensees, for example, are required to have at least three years of previous financial services experience.
  • Do you specialize in certain areas, services, or types of clients?
    Because financial planning is such a broad field, many planners specialize in certain areas or with certain types of clients. Determine if the planner's specialties match your goals and needs.
  • Will you provide examples of plans? How extensive are they?
  • How are you paid for your services?
    Always find out how the planner is compensated before you enter into a working agreement.
  • Can you help implement my investments?
    Find out if planners can help you in this area, and if so, whether the options they offer are proprietary products or a broad range of choices.
  • Will I work with you or an associate, or both?
    If an associate will be involved, perform the same background check on the associate.
  • Remember
    Full disclosure of education, experience and compensation, as well as any potential conflict of interest, is important and should be expected of any financial professional you hire. If you do not receive full disclosure from a financial professional, you should consider taking your business elsewhere. Disclosure of commission revenue should be specific as to its source (i.e. stocks, mutual funds, insurance policies, annuities, etc.) and exact as to the amount received from each source.


How do I select the financial planning professional that's right for my situation?
Ask questions. Look at the planner's background, credentials, education, and philosophy of business. Interview each planner in person. Choosing a financial planner is as important as choosing a doctor or lawyer. These questions can help you carefully analyze the attributes and abilities of each planner you interview and determine whether the planner is right for you. Ultimately, the quality of any financial planning relationship rests with you.

  • Talk to several planning professionals. Choose the one with whom you feel the most confidence and comfort.
  • Ask for a brochure or, if the planner is a Registered Investment Adviser, ask for federal Form ADV Parts I and II. The brochure or Form ADV should disclose the planner's work experience, education, credentials, licenses, philosophy of business, types of services provided, manner of compensation and potential conflicts of interest.
  • Find out if the planner is a specialist or a generalist.
  • Ask them to outline a typical profile of their two or three most successful client relationships. This may give you a better idea of the needs their practice can best fulfill.
Remember
While the answers to these questions are important, you will also need to weigh your comfort level in working with the individual planner prior to making a final decision. You should take note of the rapport that you and the planner initially develop.

Content provided in part by the Financial Planning Association