Tuesday, September 12, 2006

How to pick a financial planner

How to pick a financial planner

So you and your spouse have decided its time to consider getting a financial planner. You are not alone. With the stock market challenges over the last five years it has become difficult for do it yourselfers to make any money in the stock market. With mutual funds, ETFs, stocks, bonds, and CDs all of the choices can be overwhelming and confusing. Therefore, a lot of investors have decided to seek help from a financial planner.

So now that you have decided to seek professional help, how do you go about finding the right financial planner? First of all you might be confused by what you actually need because financial planners come in different names from financial advisors, consultants, planners, or brokers.

How does your financial planner get paid: First of all you need to determine how your representative actually makes money. Does he/she charge a fee for advice, a fee based on the balance of your account like 1%, or make money via commission on your stock or mutual fund trade.

Where can you find a financial planner: One of the best sources to find a good financial planner is to consider a referral from relative or friend. However, I caution you not to hire a relative as your financial planner because if things don't go well it maybe very awkward to fire your brother in law. Another source is to consult the Paladin Registry which specializes in helping individuals pick a financial planner. If you pick a financial planner based on a referral or looking up the planner in the phone book or the Paladin Registry there are several questions you might want to ask the financial planner.

  1. How does the planner get paid, fee or commission?
  2. What is the commission or fee? 1% or 1.5%
  3. Do you have to pay for mutual fund or stock trades? Most of the time when your account reaches a certain size you will no longer have to pay for your trades.
  4. How long have you been a financial planner?
  5. How long has the financial planner been in business?
  6. What certifications does the planner have such as Certified Financial Planner?
  7. Is the planner a member of a NASD?
  8. How many clients does your financial planner have?
  9. What size does my account have to be for me to be one of your larger clients? If you have $50,000 and all of the other clients have $5 million it is potential that you may not receive as much attention as you might like since the financial planner might be spending time with larger clients.
  10. How has the planner done over the last several years in comparison to the S&P500 index. If you are going to have to pay someone 1% to manage your money and they are only averaging 6% return over the last several years you might as well keep your money invested in a Certificate of Deposit or CD.
  11. What type of investments can you buy through your planner.

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Tags: investing, retirement, get rich

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