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What to ask a financial planner

Chris Farrell Sep 2, 2010

Question: I am looking into getting in touch with a financial planner. A credit union that I have an account with offers financial planning as a free service to its members. I am wondering what things I should keep in mind before I talk with this person b’coz as you well know “there is no free lunch” and should I take their advice with a grain of salt. Your comments would be appreciated. Thanks for your help. Bob, Corvallis, OR

Answer: There is no free lunch, that’s for sure. A big problem in the financial planning industry is that almost anyone can call themselves a planner. But in many cases the actual expertise is narrow.

For example, the planner may really be a stock broker without any real knowledge about retirement savings plan withdrawal rate options and home equity financing. Another so-called planner may be extremely well-schooled in insurance products but doesn’t have much insight into asset allocation strategies and debt pay down tactics.

It’s why I tend to like fee-only certified financial planners. They have the education and the knowledge to deal with all aspects of household finances. I like fee-only planners because there simply aren’t as many conflicts of interest. The big drawback to CFPs is that they’re expensive.

Still, I would go talk to the planner at your credit union. It’s always helpful to gather information, especially when you’re starting to look for a financial planner.

What should you be looking for? The first set of questions involve what is it that you want from the planner? What type of person will you feel most comfortable discussing issues money and desires? Ross Levin, a well-known certified financial planner and head of Accredited Investors Inc., has this smart suggestion about what to think about: “What would have changed in one year with your financial life if you were working successfully with a planner? Would you have drafted a will? Would you have saved tax dollars? Would you feel more comfortable with your investment philosophy?”

You want to know how the planner makes money. A fee? A commission? Putting your money into the credit union’s products?

I would also ask the planner to clearly lay out what they can and cannot do for you. In other words, what kind of planning do they do? How often can you talk? What should you expect?

My guess is that this isn’t the kind of planner relationship you’re looking for. But you might learn something and at the very least it’s an easy way to start figuring out what it’s you do want from establishing a relationship with a professional planner.

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