If you’ve ever thought about setting up a retirement account, doing some insurance planning, or even looking for a better way to structure you finances, you may have considered looking into a financial planner. However, did you know that all financial planners are not alike?
As someone who has worked in financial services for over four and a half years I can tell you that not all financial planners have your best interest at heart. So in this article I’m going to cover several things you should know before you hire one.
Commission versus Fee Only
The first thing you will want to know is if they are a commission based planner or a fee only planner. A commission based planner only gets paid unless they sell they sell a product. For example, if you are setting up a retirement account and plan to invest $5000 up front into this account a commissioned agent will typically get paid around 4% to 6% of the total value of the account which means the agent will earn a commission of around $200 to $300 all at once.
The reason this not so good for you is because a lot of these types of agents tend to do what is called the turn and burn. This basically means oncethey’veearned their commission they will typically enter the witness protection program never to be seen or heard from again. Now I’m not saying every agent that earns a commission is this way but some are.
This brings me to fee only financial planners. These types of financial planners don’t get paid on commission but rather by charging an annual fee. For example, if you were to invest $5000 with a fee only financial planner you would only be charged an annual fee of 1% to 2% per year. So if you invested $5000 with your financial planner you would only pay around $50 to $100 over the course of a year and not all at once.
The other reason which makes fee onlyadvisersso great is that they have more of a stake in your investments, which means the better you do the better they will do. So if your $5000 investment turns into a $7000 investment a year later your agent will earn more and you will have more money in your investment, which is win/win for both of you.
What Kind Of Tools Do They Have
Another thing to consider is the kind of tools your financial planner has available. One common thing I saw a lot of times with financial planners was that they would only work with one investment company or one particular insurance company.The problem with this is that you are pretty much limited to one option and that’s it. For example, I recently had an agent run a life insurance proposal by me and he only gave me one company as an option. The problem with this that how do I know this company is offering the best price possible and not just giving me what he gives every other client.
So before you consider any one product, take the time to see not only what kind of products they offer but also the different companies they work with. For example, when I was working in financial services I not only sold life insurance for Pacific Life but I also sold for Western Reserve Life, and several other companies so I could compare prices and find the best deal for my client.
Knowledge And Experience
Finally, the last thing you need to consider is the knowledge andexperiencethey have. In fact, did you know that you don’t have to go to college in order to be financial planner? That’s right; in fact you would be surprised at how many agents don’t have a college degree. So when you sit down with your financial planner for the first time asks them how longthey’vebeen in business and what kind of experience they have.
Another thing you can do is do a little research of your own on the internet. For example, back several years ago when I was looking for a financial adviser I came across a company called World Financial Group. So in order to find out if the company was reputable I simply started doing some looking on the search engines by typing in things like :is World Financial Group legit or is World Financial Group a scam. From here I would get first hand stories of clients who had worked with this company before to get their prospective.
On top of that I would look at their BBB rating and finally you can also check them out FINRA.ORG. FINRA is the regulatory authority for protecting investors. Here you can learn more about the companies you are planning to do business with and if any complaints have been filed against them.
When it comes down to it take a little time to do your research ahead of time and you will be much more likely to make sound financial choices that will take you in the right direction.