Choose the Right Financial Planner

It’s been said that the three most important choices you make in life are your spouse, your career, and your financial planner. Since you may have long since chosen your spouse and your career, you may be more interested at this point in choosing the right financial planner.

Right planners are the opposite of wrong planners, i.e, planners who want only to sell you something and move on to the next client. Wrong planners aren’t interested in your total financial picture. They may fail to help you develop a retirement spending plan to last your lifetime, or may not recognize that you are under- or over-insured, or that your estate plan is out of date.

Certain types of planners and investment advisors get enough bad press that some people respond, “All right, I’ll do it myself.” Yet going it alone can also be hazardous. Increasingly complex regulations make it difficult for even the informed layperson to plan his or her financial future without professional help.

Most people initially hire financial planners to look at a specific issue such as retirement projections or funding college for a grandchild. You can also pay for a comprehensive plan that includes recommendations for your investments, insurance, retirement planning, estate planning, and tax strategies.

Job Titles and Designations

There is little regulation of the terms planners use to describe their jobs. Your neighbor’s six-year-old daughter can call herself a financial planner or investment counselor without violating any laws. Thus, you should not give too much credibility to job titles.

Planners’ designations, though, tell you something about their training and experience. There are more than 80 financial planning designations, but only a few are widely recognized for their merit – these are the ones requiring years of training and experience. While the following are not the only well-regarded designations, they are the ones most often cited:

  • Certified Financial Planner: to earn a CFP designation, an individual must pass six college-level planning courses and then a two-day, 10-hour exam that has a typical pass rate of 60% or less. A CFP must also have three years planning experience.
  • Personal Financial Specialist: the PFS designation is restricted to Certified Public Accountants who undergo additional study and then take an exam. Fewer than 3,000 individuals have the PFS designation, but their training and experience, based in tax preparation, are solid.
  • Chartered Life Underwriter and Chartered Financial Consultant: both the CLU and ChFC designations are sponsored by The American College and have significant training and experience requirements. Among the services they offer, most people with these designations sell insurance and annuities.
  • Master of Business Administration: Planners with MBA degrees often earned them when they worked in the business world. In recent years, a few MBA programs have included a financial planning track.
  • Certified Public Accountant and Chartered Financial Analyst: While technically not financial planning designations, both the CPA and CFA are prestigious credentials in taxes and investment analysis, respectively.
Lighter-Weight Designations

The designations above require years of education and experience. But dozens of others can be attained in a month or two. Each year, new designations spring up that require significantly less training, most of them targeting the senior market.

Consider the Certified Senior Advisor designation, created in 1996. According to the sponsor’s web site (www.certifiedsenior, an applicant earns the CSA designation by taking three and one-half days of classroom training (plus 10-15 hours of study before training begins) and then scoring 70% or higher on a 150-question multiple choice test. An applicant with no prior experience in the field can enroll in the CSA program by paying more than $1,000 for books and training, attend class, pass the exam, and have the designation in hand – all within a few weeks.

How Does My Planner Get Paid?

You should know how your planner gets paid, since it may relate to the objectivity of the advice you receive. A planner paid by commission, for example, has a clear incentive to sell products. Following are the four ways that planners are usually compensated (often they are compensated in more than one of these ways):

  • Many financial planners receive at least some of their compensation from sales of investment products, insurance, and annuities (almost all insurance policies and most annuities are sold on commission).
  • Assets Under Management. If your investments are managed by a financial planner, then each year you will pay a percentage of your total investment for the planner’s guidance. If the fee is 1% of assets under management and you have $200,000 invested with the planner, you pay your planner $2,000 a year for investment management.
  • Fee-Only. You pay an hourly fee (typically $125-150 an hour). Fee-only planners do not accept commissions.
  • Fee-Based. A combination of hourly cost for some projects and commission for projects involving a sale.

One risk of paying commissions is that you pay more than you should for the service you receive. As an example, if you pay a 5% commission on a $100,000 investment, then you are paying $5,000 – which is more than twice as much as you’d pay for a comprehensive financial plan that includes asset allocation and specific investment recommendations.

You can buy an investment analysis tailored to your needs for $1,000 or less from a fee-only planner and then invest in the planner’s recommended no-load funds. Planners who charge an hourly fee often provide the best value and have the fewest potential conflicts of interest.

How Much Will a Financial Planner Charge Me?

Financial planners often do not charge for an initial meeting, during which they determine what you’re looking for and also discuss their services and costs. A comprehensive financial plan typically costs in the $1,500 to $2,000 range. Some brokerages sell comprehensive plans for a few hundred dollars, but the plan they draft for you assumes you will invest in their in-house mutual funds and other products on which they make a commission.

Where Do I Find a Planner?

You can find local fee-only financial planners through the web site of the National Association of Personal Financial Advisors (, or you may call NAPFA (800-366-2732) for a referral.

In addition, you may find a Certified Financial Planner through the CFP web site ( or by calling  800-282-PLAN (7526). Remember that someone with a CFP designation is not necessarily a fee-only planner. Most fee-only planners who have a CFP also belong to NAPFA.

Before You Hire, Use Ask First!

H.E.L.P. has developed the Ask First! form as a tool to help consumers when they are considering a financial planner or other advisor. Using the form, you ask the advisor to disclose in writing his or her credentials and ways of being paid. Use Ask First! at the beginning, before you start a relationship with a new advisor.  If the person is reluctant to complete the form, take this as a warning. Keep a copy of the form handy.

  • Review the person’s answers, and look for missing or inconsistent information.
  • Check out the person’s licenses and other credentials, and past complaints and sanctions.
  • If the person doesn’t answer all the questions, or if the answers make you uncomfortable, or if the answers do not “check out,” do not do business with the person. Look for another advisor!

At the same time you use Ask First! be sure to ask for and check the advisor’s references

H.E.L.P.’s Ask First! Questionniare assists consumers in evaluating the qualifications of financial planners or other advisors.  Review the answers they have provided, check the licenses and other credentials, and investigate past complaints and sanctions by contacting the California Department of Business Oversight at, and in the search box type in Investment Check Out.”

To download a copy of AskFirst!, Click here.