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Need A Financial Planner? 6 Important Steps BEFORE You Sign On

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Need A Financial Planner? 6 Important Steps BEFORE You Sign On

You spend a lifetime working and saving, amassing a retirement nest egg and wondering how best to invest it and make it last. Then you meet a financial adviser at a free investment seminar at work. You come to trust the planner, who advises you to take a lump-sum payout of your retirement account and let him reinvest it. He says the money will last you as long as you live.

You can imagine how this story could have a nightmarish ending. The adviser puts your money in risky investments you don’t understand and milks your account with high fees. Then a turn in the market makes your investments plunge in value. By the time you catch on, your plans for a lifetime of retirement income are a shambles. You might hire a lawyer to try to recoup your losses, but you yourself are guilty of trusting someone with your finances without doing a careful screening.

It can be confusing knowing where to turn for help. Myriad financial pros, all vying to manage your money, tout an alphabet soup of credentials. “Anyone can call themselves a financial planner or adviser,” says Sheryl Garrett, founder of the Garrett Planning Network, an association of fee-only planners, and author of the Personal Finance Workbook for Dummies. “No minimum experience or education is required by law.”

Legwork. Many designations used by planners are legitimate, including certified financial planner (CFP) and chartered financial counselor (ChFC), but some may not be. Finding the right financial planner takes time and legwork. People approaching or in retirement should take special heed. Nearly half of all investor complaints submitted to state securities agencies came from seniors, according to a recent survey by the North American Securities Administrators Association. As a result, the association is aggressively cracking down on unscrupulous brokers and others using titles like “certified senior specialist.”

Impressive as they may sound, some titles can be highly misleading, says NASAA spokesman Bob Webster. Bogus senior specialists commonly target older investors through free-lunch seminars, with a follow-up call a few days later from a salesperson. Typically, he or she will offer to review seniors’ assets and recommend liquidating securities and using the proceeds to buy indexed or variable annuities, Webster says.

With a little homework, you can steer clear of swindlers and find a legitimate professional. A good planner can devise an overall financial plan that will recommend how to allocate assets and determine if you’ve got the right blend to meet your specific retirement goals. What’s more, a planner can advise you on how to draw down funds from your accounts when needed and handle estate-planning and tax matters. Here are six steps toward finding a planner who is right for you.

  1. Gather names of at least three planners. Start your search by asking for references from friends or relatives. Of course, you may have to dig deeper to track down a good planner. Several reputable national organizations require members to earn credentials by passing exams. Each offers a searchable database with state-by-state contact information for planners. The groups include the National Association of Personal Financial Advisors, the Garrett Planning Network, the Financial Planning Association, and the Certified Financial Planner Board of Standards. The American Institute of Certified Public Accountants has a list of CPAs who’ve earned the Personal Financial Specialist designation.
  2. Screen for credentials. Look for someone educated in a range of financial issues, not just a salesperson who’s going to try to sell you a certain product. Many planners require that new clients have a minimum income or net worth. But, given the sheer number of planners to pick from, you should be able to find one who will work with you.

Be sure the planner has experience helping people with backgrounds similar to yours, advises Irene Leech, a consumer studies professor at Virginia Tech and a NAPFA consumer representative. Ask the planner to describe a typical client. Find out how long the person has worked as a planner. And ask if he or she is a fiduciary and will put that in writing. In doing so, the planner agrees to always put your interests first.

In general, an adviser should have the certified financial planner designation, which is awarded by the nonprofit, Denver-based Certified Financial Planner Board of Standards. The title indicates the individual has met CFP education, examination, and experience requirements and has agreed to adhere to the organization’s code of ethics. A CFP also is independently registered as an investment adviser with his or her state or with the Securities and Exchange Commission.

  1. Understand how the planner is paid. The most common types of arrangements are fee-only, fee-based, and commission-based. Fee-only planners do not take commissions on investments they recommend to you but instead charge either a fixed fee or an asset-based fee, typically 1 to 2 percent of the assets under management. For many people, paying by the hour for planning advice can be more cost-effective.

Fee-based planners can earn commissions on investments they sell you while also charging a fee. If a planner receives commissions, that can pose a conflict of interest, Garrett warns. If the planner won’t provide full disclosure about pay, move on.

Ask for a written agreement detailing the total compensation and services that will be provided. Will the planner review your total financial picture, from retirement accounts to taxes, or just part of it? Be clear on how often the adviser will be available to you.

  1. Do a background check. Shift into gumshoe mode. Ask to see the planner’s ADV Form, Part II. This is a form that a planner files with the SEC; state agencies require similar filings. It contains information about the adviser’s background, services, and fees. Next, check with the adviser’s state securities regulator to make sure the individual is licensed and to check for complaints. State-by-state contact information is available at NASAA’s Senior Investor Resource Center. The Certified Financial Planner Board of Standards investigates complaints filed against CFPs and lists any disciplinary actions on its website. If the investment adviser in question was a broker/dealer registered with the Financial Industry Regulatory Authority, formerly NASD, the adviser may have been subject to disciplinary action. Do a broker check at
  2. Ask tough questions. After your sleuthing, schedule a face-to-face interview with your top three picks. Why wait? Simple psychology. If you meet beforehand, a persuasive sales pitch might sweep you away. Don’t be afraid to ask questions until you’re satisfied. “You’re in the driver’s seat,” says Garrett. “Think of it as a job interview. But remember, this time you’re the employer interviewing them for the job.”

You should feel you are getting straightforward answers to your questions. There is nothing wrong with asking a prospective adviser how he or she defines success with a client. Is it a certain rate of return for a portfolio? Or helping a client save or make a certain amount of money? Regardless of how at ease you are with the planner, ask for references from one or more current clients or, better yet, a professional reference—and be sure to call them.

  1. Listen to their questions. If the planner just asks about your income and assets, be cautious. He or she should want to know far more: about your family, your goals, and your risk tolerance. A good financial planner is someone you hire to help you make your nest egg last in retirement. Your goal, says Virginia Tech’s Leech: hiring someone who can make your overall financial life smoother, with less day-to-day angst about money. After all, who needs it?

After Fifty Living™ was founded by Jo-Anne Lema, a genuine Boomer and member of the 50+ generation. As she likes to say, “Our enormous generation is charting new territory – we’re healthier, better educated, and more financially fit than any other generation at this time. And, as we march through history, 110 million strong – unique, new issues are developing. It’s exciting to be a part of the development and growth of This is a historic solution for a historic generation.”

Jo-Anne spent many years in the financial and operations side of higher education after having received a doctorate in education management and administration from Harvard, and an MBA from Southern New Hampshire University. Launching out on her own, though, has been the fulfillment of a life dream. Jo-Anne believes that “AfterFiftyLiving™ will delight its visitors, catalyze its partners, and will significantly benefit those who engage it.”

Residing in New England along with her husband of 35+ years, she never ceases to brag about her two children and 4 grandkids!

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