How to Find the Right Financial Planner For You
We all know what it means to be a teacher, lawyer or doctor. But do you know how to identify a financial planner? Unfortunately, many people can call themselves a planner (or financial advisor) even if they have a modicum of relevant education, little industry experience, and scant knowledge of how to actually provide full-scope financial planning. Simply put, these people are allowed to call themselves planners or advisors, even if they are merely a salesperson with a product to sell.
As you'd imagine, the people that actually provide bona fide financial planning services are none-too-pleased that the job title is applied to just about anyone in the financial industry. That person who sold you insurance last year? They're allowed to call themselves a financial advisor. Same goes for the newly-trained stock broker that is cold calling you with a hot stock tip.
Here's a handy roadmap that can help you find a legitimate financial planner, and a closer look at which type of planner or advisor is right for you.
It all starts with education. The best advisors are rigorously trained and tested in order to garner a designation as a Certified Financial Planner®. If you work with a CFP®, you can be sure that your advisor has the knowledge and training to meet your needs.
What about integrity? Here's where things get tricky. If a CFP® professional works for an investment bank (such as Morgan Stanley or Merrill Lynch) or a "wealth management" firm (such as Ameriprise or Edward Jones), they are a known as a "broker" and they work for a "broker-dealer." These people are pressured to sell high-cost investments such as mutual funds (which provide hidden kickback fees to the advisor and their firm). Adding insult, these firms and their advisors charge steep annual management fees, and frankly, give skimpy financial advice.
Instead, try to seek out the help of a Registered Investment Advisor (RIA). These people are held to higher ethical standards, and are typically known as "fiduciaries." Yet not all RIAs are alike. Some RIAs charge a reasonable annual fee (as a percentage of the assets they are managing), a figure which should ideally not exceed 0.5%. Charging 1.0% or even 1.5%, as some do, is excessive and unkind.
Other RIAs avoid this approach altogether and instead charge a transparent flat free for their services, providing traditional financial planning services, investment management or advice, or both. Lastly, some advisors also charge by the hour, which is ideal for someone that has a series of questions they would like to get answered.
Where does Huguenot Financial Planning (and I, David Sterman) fit into all of this? My primary focus is on flat fee investment planning, tax-and-cash flow planning, other topics covered by planning such as insurance, real estate, education and healthcare planning. And many of my clients come to me for comprehensive retirement planning. I also help clients with hourly advice, though that is less common. You can read more about that on my website.
When it comes to investments, I only provide investment advice, and am proud to draw from 30 years of investment experience in helping clients understand how to develop the ideal portfolios. I am the co-pilot flying the plane with you, but you keep full control of your investment accounts.
Many clients work with me for a number of years as they build and then spend their wealth Other clients are just looking for a financial "make-over" and only get back in touch as their needs change. Why don't I take charge of people's accounts (known as "managing money")? Because I see that as a conflict of interest. And I strive to be a fiduciary in the truest sense of the word.
The key takeaway: Always work with a CFP, preferably that is is an RIA (or a member of an RIA firm). You can find high quality (and high-integrity planners on websites such as The Garrett Planning Network, The National Association of Personal Financial Advisors (NAPFA), the XY Planning network and the CFP's "Let's Make a plan" site.