How to Choose a Financial Planner

Three Parts:Narrowing Down Your OptionsFinding the Right Planner for YouWorking with Your Financial Planner

A financial planner can help advise you on how to save, invest, and grow your money. If you have a specific goal for your finances, a financial planner can help you manage your money to achieve that goal.[1] It's important to evaluate a potential financial planner very carefully, as the planner you go with will be responsible for your savings and investments. Knowing how to evaluate and choose a financial planner can help you plan for your future and get the most out of your investments.

Part 1
Narrowing Down Your Options

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    Evaluate your financial goals. Before you choose who will manage your money, you should know what your goals and expectations are for that money. This can help you choose the financial planner that's best for you, and it can keep your expectations grounded in what you hope to achieve. A financial planner can help you manage your money at any stage of life.
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    Consider the advantages of a CFP. When looking for a financial planner, it's best to choose someone who is licensed as a certified financial planner (CFP). Certification means that that financial planner is licensed, follows regulations, and take regular mandatory courses on financial planning.[5]
    • Some financial planners have the Chartered Financial Consultant (ChFC) certification, but it is not as difficult to earn as the CFP certification.[6]
    • CFPs are required to pass a rigorous and comprehensive board exam in order to practice as a financial planner. They take college-level courses approved by the CFP Board, and must have accrued several years' worth of financial planning experience.[7]
    • CFPs are also bound by their professional requirements to follow a standard of integrity, objectivity, confidentiality, and professionalism.[8]
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    Search for CFPs. Once you've narrowed down the qualifications/certifications to search for, you can begin looking for a certified financial planner. You can find a list of CFPs by searching online or in the phone book, but it's best to look for a CFP who has a solid reputation in the industry.[9]
    • Ask friends, family members, and colleagues for CFP recommendations.
    • Read reviews of potential CFPs online to get a sense of overall consumer satisfaction.
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    Look at each planner's pay structure. Some financial planners work on a commission. Others work off of a flat, hourly rate. Depending on that planner's pay structure, his investment decisions may be based more on his potential income (like getting a commission off your money) rather than your best financial interests.[10]
    • CFPs working at a flat, hourly rate are more likely to invest your money without any regard for their own profits or commissions.
    • A financial planner working on commission may not charge you for each hour of work, but could end up making investments because they benefit him more than you.
    • Also consider if the CFP works for a particular company or is independent. Independent advisers are able to recommend products from a variety of companies while a captive adviser is only able to offer products from the company for which they work.
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    Compare each CFP's clientele. Some financial planners work within a niche, like working with charities or recently divorced individuals. Some experts also suggest that CFPs tend to work with clients close to their own age. These may not necessarily be a problem for you, but it's important to understand who your potential CFP typically works with to ensure your finances are put towards investments you're interested in.[11]
    • Once you have a list of potential CFPs narrowed down, try searching online to find out who each CFP tends to work with.
    • If you've been in direct contact with a CFP you're considering, reach out and ask that CFP who his/her typical clients are.
    • Consider whether a given CFP's typical investment plan would work for you and your finances.

Part 2
Finding the Right Planner for You

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    Convey your expectations. Once you've narrowed down the field of potential planners you're interested in working with, you should contact each one individually to see if that planner would be a good fit. Let each planner know how much money you're looking to invest, what you hope to get out of your investment, and what kind of timeline you're looking at.[12]
    • Even if you don't have a huge sum of money saved up, there are financial planners who work with middle-class investors.
    • Check your options for a middle-class or lower-income investor on websites like,, and
    • If you're not a financial whiz, your potential planner should explain financial terms to you in a way you can understand. He should also ensure that you're clear on what he'll do before he would make any investments.[13]
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    Ask your CFP for a quarterly report. The best way to get a feel for your potential CFP's abilities and interests is by asking to see a quarterly report with the investors' names redacted. This will help you get a clear idea of what that investor has done for others (for better or for worse), and by extension, what he could do for you.[14]
    • Ask the planner you're interested in working with to walk you through each line of her quarterly report.
    • A good CFP should explain not only what each term means, but also why she made the choices she made, and what results came about from those decisions.
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    Request a sample finance plan. Different financial planners work with different types of investment approaches/strategies. Some planners prefer to use actively-managed funds, while others prefer passively-managed funds. Some work with high-risk investments, others with low-risk investments, and still others try to find a middle ground. Knowing how a given planner makes investments should be a make-or-break part of the evaluation.[15]
    • Because of the extensive educational and experiential requirements CFPs must meet, a CFP will be able to help you manage your money, make smart investments, and save for the future, for both short- and long-term financial goals.[16]
    • Ultimately, the planner you choose should be someone willing to make investments that are consistent with your goals and that match your risk tolerance.
    • If a planner refuses to give you a sample finance plan, or if the finance plan is drastically different from what you are looking for, it's probably a red flag.
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    Run a background check. Just because a financial planner looks good on paper, it does not necessarily mean he has a clean, consistent record you can trust. Some irregularities may show up when you do your initial search for a planner, but others may require a bit more digging to ensure that your planner is capable and trustworthy.[17]
    • Red flags to look for in a financial planner's history include significant loss of investments (due to mismanaged money, not due to missed opportunities), violation of professional codes of conduct, and violation of the law.[18]
    • You can check your CFP's Form ADV or Form U-5 to make sure your planner has a clean record.
    • You can also check your advisor's disciplinary history by consulting the Financial Industry Regulatory Authority's website,[19]

Part 3
Working with Your Financial Planner

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    Read the fine print. Before you sign on with a financial planner, even after doing your due diligence, you still need to read the fine print of that planner's agreement. Some planners include a mandatory arbitration clause in the contract. Others may try to sneak in some type of speculative investment clause without your consent. Always read the details of any contract or agreement before you sign, as signing may revoke your legal right to contest that planner's decisions or pursue arbitration against that planner.[20]
    • Have a lawyer you trust look over the contract. Convey your needs, desires, and limits to your attorney so she can properly evaluate the contract before you sign.
    • Make sure your contract ensures that your investments will be liquid (easily convertible to cash), transparent, and conducted for a reasonable cost.[21]
    • An important factor to consider when you sign a contract is whether your advisor follows the suitability standard or the fiduciary standard.
    • Advisors who adhere to the suitability standard are still legally required to ensure that an investment is suitable for you, but there is no ethical requirement that the investment must be the best option available for you. These advisors usually work on commission.
    • An advisor who adheres to the fiduciary standard is legally bound to give you sound advice that meets your financial needs, making sure that all investments are in your best interest. A fiduciary standard advisor usually works as a fee-only advisor.[22]
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    Negotiate the payment terms. There are numerous methods of compensation, depending on which advisor you choose to work with. Some experts advise that the method of compensation is largely a matter of personal preference, and should not overshadow a given planner's competence and record of success.[23] The most common payment terms are:
    • Fee-only — Your payments to the planner are based on consultation meetings, plan development, or his management of your investments. These may be billed as an hourly charge, a flat project charge, or on a certain percentage of your investments being managed.
    • Commission-only — You do not pay for advice or preparation of your financial plan, and instead pay your planner with a portion of the sale of financial products used to implement your planning recommendations.
    • Fee-offset — Profits from the sale of financial products are offset against any fees billed to you during the financial planning process.
    • Combination fee/commission — You pay a fee for advice and plan preparation, and your planner receives commissions from certain products used to meet your plan's goals.
    • Salary — Most financial planners working on salary are usually employed at a financial service institution, like a bank or credit union.
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    Assess your planner's performance. The best way to evaluate your financial planner is by reviewing her track record. If your planner is doing her best for you and helping you meet your goals, you are getting good service for your dollar. Some commonly agreed-upon qualities of a good financial advisor include:[24]
    • Financial decisions that are based on your goals
    • A willingness to establish your risk tolerance and make investments which you are comfortable with
    • Objective advice without any ulterior motives or conflicts of interest
    • Regular face-to-face meetings to review your investments


  • You should ask questions about a given financial planner's qualifications, experience, area of specialization, and what he will be able to do for you.
  • Charges are also a key differentiating factor. Ask the planner you're interested in working with how her pay is structured, and how that might affect your investments.

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Categories: Managing Your Money