There are three primary questions to ask a financial planner on the telephone, before committing to a face-to-face appointment. The first is their certification and affiliation: Are they a certified financial planner (CFP) and do they belong to a professional association such as NAPFA (the National Association for Fee-Only Financial Planners). It is of great benefit to do some internet research on types of financial planners before committing to an appointment. The second question, related to the first, is how do they earn a fee from you for their services? There are two types of financial planners, no-fee (commission) and fee-only.
The commission planner earns a percentage on a quarterly or annual basis on the amount of money that you invest with them, as well as earning a fee for making a financial plan. These financial planners are almost always affiliated with specific brokerage companies, such as C. Schwab or TD Waterhouse, and will advise you to invest your money with their affiliated company. The fee-only NAPFA planners charge a large upfront fee, ranging from $2-4,000 to review your financial needs and goals, make a financial plan, and they claim to have no affiliation with specific companies. So it important to know whether you want to work with someone who charges a large upfront fee, or fees later on, or in some cases a combination of both. The third question is to ask for references if you did not obtain the financial planner’s name from a contact of your own.
The following are important questions to ask at your face-to-face appointment:
1. Ask for a review of your current financial picture, including all investments, debts, income, tax returns and insurance policies to determine your current net worth. A good financial planner will have advice on each of these domains.
2. Discuss your specific goals and reasons for seeing a financial planner: planning a large purchase, planning for retirement, looking for future investment growth, investing for college funding, etc.
3. Ask for a written financial plan that meets your main goal(s) in seeking financial assistance.
4. Ask what rate of return the financial planner utilizes to calculate future investment growth.
5. Discuss what your proposed net worth will be at an estimated future date that is important in your goals, such as a retirement date.
6. Ask the planner’s opinion about any large purchases you are planning to make.
7. If you are planning to invest with this financial planner as your investment advisor, ask for a series of recommendations on investments, and a history of past performance on these investments.
8. Ask what paperwork and next steps you need to take of, such as attending to a rollover, and what the planner and his staff will do next.
9. If the financial planner is charging you for a set number of hours of work, confirm the number of hours remaining for the planner and their staff.
10. And most important, ask for a period of time after the appointment to consider the financial planner’s recommendations before you sign any forms or make any decisions.
A good financial planner can make a huge difference in your financial future. However, it is important to “plan” for the meeting with the planner in order to have maximum success.