Q. What's the best way to find a good financial consultant? I got a list of names and made calls. (Some) are expensive. How do you know which one will really do justice with your money?
What a great question. These nail-biting days, everyone's in need of a little financial reassurance. But picking a planner takes far more care than just flipping open the phone book.
“The biggest mistake people make is being very heavily influenced by the adviser's personality and sales skills,” said Jack Waymire, author of “Who's Watching Your Money?” Those traits, however, “have nothing to do with competence and ethics,” he said. “Learning the right questions to ask (when picking a planner) is critical.”
Waymire is co-founder of the Paladin Registry (www.paladinregistry.com), which offers information on how to pick a financial planner, including what to look for, what questions to ask, what to avoid.
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Not surprisingly, his company has been in demand lately amid the relentless roiling on Wall Street. Web site traffic is up 30 percent since June and phone calls from frustrated, worried investors have jumped, especially recently.
He advises checking into advisers' professional education and certification, see if they have a clean compliance and licensing record. Also examine their fee structure and get in writing disclosures about potential conflicts.
If you want help with setting up a budget or getting started on saving for college or retirement, you'll probably want a certified financial planner. If you need specific help with taxes, a certified public accountant or tax attorney might suffice.
If you have questions about setting up a will or living trust, consider an estate planner or attorney.
Here are some tips:
Get recommendations from family or friends.
Look for someone with at least five years of experience. You don't want to trust your hard-earned assets to someone who just switched from selling furniture.
Meet with at least three for face-to-face interviews.
Be sure they can discuss your finances in understandable terms. The best financial planners are good teachers.
Ask how they're compensated. Fee-only advisers typically charge by the hour or a set rate, say $1,500 to write a basic financial plan. Or they charge as a percentage – typically 1 percent – of your investing assets. Fee-based means they charge a fee and can take some form of commission on financial products they sell.
Ask about their experience. You want someone familiar with your financial place in life (working professional, young homeowner with kids, retiree, etc.)
Find out their accessibility and ability to take your questions, whether by phone or in person.
Ask about professional designations. Be sure their title is legitimate and appropriate to your financial needs.
No matter whom you choose to handle your financial planning, it's smart to check their credentials.
“It's good to do your homework,” said California Department of Corporations spokesman Mark Leyes. “Check on their background; see if they've had any disciplinary action.”
Even if only a small number of financial consultants are predatory, said Leyes, “that's small comfort to someone who loses their life savings to a scoundrel.”