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Jim's 6 Critical Questions to Ask When Choosing a Financial Planner


1.) What is your primary function, financial planner, stockbroker, or insurance agent?
If you are looking for a financial planner, you obviously want this answer to be financial planner. If the answer is stockbroker or insurance agent, continue with the following questions only if you are seeking just investment advice or just insurance advice.

2.) Will you be acting as a fiduciary, always putting my interest first?
You want someone who is a fiduciary, someone who is putting your best interests first. Most stockbrokers and insurance agents are not fiduciaries and have a legal obligation to their firm first, not you.

3.) Are you a Certified Financial Planner designee?
The CFP designation has emerged as the premier designation in the financial planning field, however having the designation does not by itself assure the client that the a representative is a financial planner - they may have the knowledge of a CFP practitioner but still primarily be a salesperson selling product. This is why the other questions are important, especially question 2.

4.) Are you process or product driven? If process driven, will you explain your process and basic philosophy in writing?
This question should help separate the product salesperson from the financial planner. The problem is that someone who is product driven may be inclined to say they are process driven (remember we are talking about being process driven with you, the client, not having a process to sell product!). This is why it is important to have the process and philosophy disclosed to you in writing. If someone is truly process driven they should have the information readily available, and be able to explain it to you easily because it would be part of their business culture.

5.) Are you fee-only? If not, how are you compensated? Will you provide full disclosure of any compensation arrangements in writing?
With a fee-only planner you know how much is being paid to the advisor since they do not receive commissions or fees from any other source. Many believe this is the cleanest way of providing objective advice. If the planner is not fee-only, ask for (in writing) how they are compensated and what charges you would incur on any products that are recommended to you. With either a fee-only or other planner, ask about any conflicts of interest.

6.) Will you disclose your background and experience in writing?
You have a right to ask for a resume on the planner you are considering doing business with. If they are a Registered Investment Adviser (RIA) and a principal of the firm it should be disclosed on the brochure they are required to provide you with (Form ADV, Part 2). If it is not disclosed, request a written copy of the planner's background, experience, and credentials.

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