Picking the Perfect Financial Planner

Pablo Picasso once quipped, “I’d like to live as a poor man with lots of money.” And wouldn’t we all? To have money, and all the wondrous things that money can provide, without the hassles and headaches of tending to that money –it would seem almost, er, surreal. Yet if anyone could make Picasso’s dream come true, it would be a capable financial planner.

Suppose you determine that you need a financial planner, where in this great, big American landscape would you find a good one?

Ask yourself why

Financial planners — whose business cards may also say financial adviser, financial consultant or wealth manager — vary widely in their practices and expertise. Most, if not all, planners will manage or provide guidance on investments. Others may offer counsel on everything from how to balance a checkbook and reduce debt to how to lower taxes or set up an estate plan. Some will work with you for a day to help you get your fiscal affairs in order. Others prefer longer-term arrangements. Take a good look at your own strengths and weaknesses around money, and ask yourself where you most need a helping hand.

Gather names and brochures

Start by drafting a list of potential planners. Begin close to home. Ask family, friends and business colleagues for referrals. You can also contact either the National Association of Personal Financial Advisors (www.napfa.org) or the Financial Planning Association (www.fpanet.org) for a referral to members in your area. Some people are OK working with a planner from afar, perhaps even in another state. Ask yourself as to how you would feel about that.

Look for experience and credentials

Just about anyone can call himself/herself a financial planner, and just about anyone does. That’s why other, more standard credentials are important. A business degree, such as an MBA, is a good thing. Some CPAs and attorneys specialize in financial planning. In addition, the designation CFP, which stands for certified financial planner, has become widely recognized as a mark of competency over the past several years. To attain the CFP, a planner must meet certain educational requirements, pass a fairly tough exam and then have a requisite amount of practical experience.

Toss the bad apples

Beyond having credentials, a financial planner (or his employer) should also be registered with the Securities and Exchange Commission. Find out by asking to see a candidate’s ADV (adviser) form. Anyone who professionally gives investment advice is required to provide such a form. It will provide you with lots of interesting information about the planner and his practice, such as how long he’s been in business, how many clients he has, and how much money he manages. It will also tell you about any disciplinary history for unethical conduct. Check, too, with the local Better Business Bureau (www.bbb.org) and the Certified Financial Planner Board of Standards (www.cfp.net) to make sure the planner isn’t prone to lapses of good judgment.

Stroll into the office

After you’ve gathered a list of planners who look clean on paper, it’s time to meet face to face. Schedule an initial appointment. There should be no charge. Although you’re no expert in the field, you can still get a pretty good sense as to whether a planner knows his stuff. Ask what sets a planner apart from other planners. Ask for his philosophy on money and whether he/she has a clearly defined strategy for financial success. As for investing, ask how he/she does it, and whether his choices in investments are based on hunches or on academic research.

Check out the bill

Be clear about how, and how much, a planner will charge you. Some financial planners charge by the hour, some will charge you a percentage of your assets “under management” and others will make money off commissions from the products they sell you. Many planners who do not sell products or take commissions (fee-only planners) feel that they can be more objective in the advice they give you, and in the investments they suggest for you. Commissioned planners argue that any honest planner would never be swayed by commissions into making bad investment choices. Like astronomers and astrologers, the two groups sometimes seem to hate each other, but there’s no reason that you need to pick sides.

“You want someone who is honest and really knows what he or she is doing; that matters much more than how that person is paid,” said Helen Salazar-Realini, a certified financial planner.

Is there chemistry

Financial planning is very much unlike, say, auto mechanics. It can get awfully personal at times. A competent planner working on your long-term financial goals should be asking you questions about your retirement dreams, your health and, perhaps, even the quality of your marriage and your relationship with your children and grandchildren. (Well, do you want them in your will or not?) If you’re going to be working with a planner for a long time, the two of you should click.

Russell Wild is both a financial journalist and a fee-only investment adviser based in Allentown, Pa.