Some of the most stressful times in our lives are triggered by financial issues. Creating a financial plan can help relieve much of the financial stress we may feel in our busy lives. Without a plan, you’re like Alice in Lewis Carrol’s Alice in Wonderland when she meets the Cheshire Cat: Alice: Would you tell me, please, which way I ought to go from here?
The Cheshire Cat: That depends a good deal on where you want to get to. Alice: I don’t much care where. The Cheshire Cat: Then it doesn’t much matter which way you go.
Without a goal or destination in mind, you have no idea if the path you’re on is the right one for you, and that can create a lot of anxiety in your life. A financial plan provides a roadmap to your destination, and it’s your compass.
A well-rounded plan should include:
- Your current financial position
- Protection planning and/or risk management
- Tax planning
- Retirement planning
- Investment planning
- Estate planning
Creating an effective financial strategy takes time, research, and a lot of discussion and decision-making. You can choose to go it alone, or work with a financial professional. For many people, working with a professional makes this process much easier and eliminates much of the stress and anxiety that goes with it. It also greatly improves the odds that you will take action on your plan.
Many people don’t know where to go to find a financial professional, someone who’s experienced, qualified and has your best interests at heart. Just about anyone can hang out a shingle that says, “Financial Planner,” and horror stories abound about bad experiences with a financial advisor. Here are my suggested tips for finding a financial professional to help you create a plan:
Seek the “Fiduciary” Standard
Presently there are two legal standards that apply to advisors. One is the “fiduciary” standard and the other is the “suitability” standard. An advisor who acts as a fiduciary is legally required to put your best interest above his or her own. Isn’t that the way it is anyway? The simple answer is no.
The suitability standard is defined as making recommendations that are consistent with the best interests of the underlying customer. The suitability standard only details that the advisor has to reasonably believe that any recommendations made are suitable for clients, in terms of the client’s financial needs, objectives and unique circumstances.
What does that mean to you? It means the advisor can sell you the product that pays him the highest commission and contains the highest fees and as long as it’s suitable to your situation. This could result in significantly less dollars in your account over time. Be sure to ask to see in writing that your advisor is working in a fiduciary capacity.
Find a Qualified Fiduciary
Look for experience, education, training, credentials and registrations. A great source to obtain this information is the website www.finrabrokercheck.com. This website is established by the Financial Industry Regulatory Authority (FINRA). Simply enter the advisor’s name, and if he or she is registered with FINRA, the public record will be displayed. That record will provide the person’s experience, education, training, credentials and registrations. In addition, it will show you if there are any consumer complaints about the person.
Check Professional Designations
In the world of financial advice and planning, designations can be a confusing alphabet soup. A professional designation should demonstrate that the advisor dedicated time and effort to increase his or her knowledge base and skill level in the field.
“Creating an effective financial strategy takes time, research, and a lot of discussion and decision-making. You can choose to go it alone, or work with a financial professional. For many people, working with a professional makes this process much easier and eliminates much of the stress and anxiety that goes with it.”
The challenge is a group of letters after someone’s name doesn’t tell you the educational requirements, the prerequisites, whether an exam was required or whether the advisor has continuing education requirements to keep the designation.
Fortunately, you can find out what the designation means by going to www.finraprofessionaldesignations.com. Every person professing to be a financial advisor will likely have one or more professional designations, but the experience and education requirements can vary widely. Someone who talks a good talk and has lots of letters after his or her name could be a very heavy on sales and very light on actual financial planning experience.
It’s important to do your research before opening up your financial life to someone professing to be a financial advisor. You want to make sure that individual is truly qualified to help you and has your and your family’s best interests at heart. The time you spend selecting the right advisor will greatly increase your ability to create the right financial plan for you and your family.
Ramiro Marmolejo is a Certified Financial Planner (CFP) and Chartered Financial Consultant. He has been in the financial services industry for 20 years serving individuals and business owners. For more information about Marmolejo, visit www.wealthwatchadvisors.com or call 210-249-5360.