After reading Managing Financial Stress, you may have recognized your need for proper financial planning i.e. establishing your financial goals and developing a plan to accomplish them through the use of financial products, personal discipline and motivation. But how do you go about this process? One way is to get expert, independent guidance.
A professional financial planner is someone who assists you in developing a financial strategy to accomplish your defined goals. He or she works with you to:
- identify your financial objectives
- collect and assess all relevant data
- develop a written financial plan
- assist in implementing the plan
- periodically review and revise the plan
For such services, the planner charges specific fees and/or may receive commissions on products sold. Bear in mind, however, that legitimate financial planning is not a sales pitch by an individual or organization in order to sell a predetermined product.
If you choose to benefit from this service, one of your first questions should be, “Is this person suitably qualified?” Qualified planners must complete certain academic courses, satisfy specific experience requirements and conform to standards of professional performance and ethics, before receiving the following professional designations.
Designations and Certifying Bodies
Certified Financial Planner (CFP) - CFP Board Of Standards
Chartered Financial Consultant (ChFC) - The American College
- Canadian Association of Insurance and Financial Advisors
Personal Financial Specialist (PFS) - The American Institute of Certified Accountants
Chartered Financial Analyst (CFA) - The Institute of Chartered Financial Analysts
In addition to seeing evidence of the planner’s certification, it is also important to check their performance background, for eg. find out if they have been subject to any disciplinary action. Enquiries can be made to the National Association of Securities Dealers (NASD), the Securities and Exchange Commission (SEC), as well as to any of the certifying bodies that issue the above designations.
But in the final analysis, the proof of the pudding is in the eating. If you choose to seek professional advice, remember that financial planning is a life-long process, because your goals and objectives change along with your financial circumstances. Therefore, you will need someone who is likely to be accessible to you in the medium to long term and, most importantly, someone whom you can trust.
Here are a few questions that may help you make your decision:
- Is this financial planner suitably qualified?
- How experienced is this person?
- Is this person strongly aligned to a specific financial product?
- Is this planner‘s income dependent on the quality of their advice (eg. a service fee) or rather on the sale of a financial product (eg. a sales commission)?
- In light of the above questions, how objective can I expect this person‘s advice to be?
Some people ask themselves the question: “If a professional planner cannot stake their future earnings on the quality of their advice, why should I stake mine?”
Finally, use the ‘results test‘ in choosing a planne