5 Tips for hiring a financial planner

As a business owner, at some point in time, hopefully,  you might come into a lot of money. In many cases, more than you have ever seen in your entire life.  For some people, managing a large amount of money can be intimidating. For others, not so much. Regardless of how well you think you can manage money, it is important to understand that you must use this money wisely and invest it properly.

Many entrepreneurs make the mistake of blowing through money as soon as they come into it. Remember, just because you have several thousand dollars of unappropriated money, you should not be planning lavish vacations, or making unnecessary purchases.

Keep in mind, at some point in time you are going to have to stop working. If you do it right, you will be able to enjoy retirement without worrying about running out of money. My best advice is hiring a personal financial planner. 

 

What is a financial planner?

Financial planners are people who advice clients on how to save, invest and grow their money. They are different than stockbrokers. They come from a variety of background and can offer many different services.

In fact, a financial planner does not need credentials to provide services, anyone can be take on the challenge. Furthermore, unlike other professions such as stockbrokers, or insurance agents, it does not have its own regulator. That is why you have to be extra careful when selecting the right company or person for your needs.

There is a wealth of financial information readily available, and unless you work in the field, it is almost impossible for you to make all the right decisions while running your business. The selection of the right person is crucial for your future success.

 

When is time to hire a financial advisor?

Honestly, everyone should have an advisor to check in once a month. However, it can be very expensive, and some cases there is a threshold requirement before you can be accepted as a client.

How much would an advisor charge me?

It varies. Most advisor are fee-only, in fact, you should stay away from the commission based ones. They can charge anywhere from $1,000 to $3,000 for a comprehensive financial plan, and a few hundred dollar monthly for ongoing advice.

Here are 5 tips to hire the right person

 

1. Check for CFP credentials

It is best to go with someone who actually have the CFP (certified financial planner) credentials. It is an instant sign of credibility. People who hold this credentials have gone through a series of exams, continue education classes and are held to strict ethical standards. A good tool to find registered advisors is from the National Association of  Personal Financial Advisors. 

 

2. Planner’s pay structure

Commission-based: Advisors working on commission could have a conflict of interest. Because part or all of their salaries are based on commission, they will make decisions to benefit themselves. 

Fee-only. This is highly advised as they have the duty to act on the best interest of their client. Their income is based on a flat-fee, hourly rate, or percentage of the assets they are managing. 

 

3. Check their background

You can start by asking them simple questions such as: Has any regulatory body placed you under investigation for any reason? Have you ever been convicted of a crime of any sort? Also ask for references of clients whose goals have been met. You can do your own homework by searching on BrokerChecker. Also, advisors are required to disclose any disciplinary actions, you can search directly from the SEC website. 

 

4. Market beating promises

Do some research on how the market is performing. If the advisor promises you to outperform the current market, this could be a red flag. If the planner is in fact achieving such hard task, they might be taking more risk than you are willing to take. The market is very volatile and no one can safely guarantee its performance. When someone is bragging or predicting an outperformance, it is best to walk away. 

 

5. Gut feeling

At the end of the day, if something does not feel right, do not go with it. Placing your money in someone else’s hand is a big deal, and if for some reason you are not comfortable, you should listen to your guts. 

 

In summary, do your homework, understand where you are in life, and where you want to go. Keep in mind if you have kids, and plan to pay for their college. All of these information is necessary for your success. And remember, your advisor is someone you should fully trust, as you will be sharing a lot of personal information with them.