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Featured Article

Choosing a financial planner can be one of the most important financial decisions you make, but finding the right person may be difficult.

Our financial lives have become very complicated. Years ago when you walked into your local savings bank to get a mortgage, you were given two choices: do you want a 20-year or a 30-year mortgage? Today banks offer an overwhelming selection of mortgages and rates to choose from plus a mind-boggling array of financial products. As a result, more individuals are using a financial planner. You may need a trusted advisor to help you through the financial maze-but how do you find one?

Finding the Right Planner

Begin by asking your friends, work associates and relatives if they use a financial planner. Speak with your other professional advisors such as your attorney or accountant and ask whom they would recommend. Contact professional organizations and ask them to send you the names of planners in your geographical area.

Next, interview several planners before you decide to become a client. Many planners offer a free introductory consultation-take advantage of this opportunity to find out about the planner and the firm. Don't be afraid to ask tough questions. Remember, this is your money.

How Financial Planners are Compensated

It is important to understand how the financial planner will be compensated for his or her services. Planners generally charge using one of these four methods:

• Fee-only: This can be an hourly fee, a flat fee for a comprehensive plan or an annual retainer amount. Fee-only planners do not earn any compensation from the investments they recommend; they may not be able to charge on a commission basis because they may not be licensed to sell financial products.
• Commission-only: A commission-only planner earns his or her compensation when you actually purchase an insurance or financial product, such as a mutual fund, from him or her. When dealing with commission-only planners, exercise caution because their only source of income is the revenues generated from selling.
• Fee and commission: Also known as fee-based planning, this is the most popular form of financial planning compensation. The planner earns an hourly fee for meeting with you and providing advice as well as commissions on financial products you may purchase.
• Money management: Some planners manage your investments for you and charge you a percentage of the assets under management as their fee (usually around 1%). Again, exercise caution when choosing a money manager especially if you are giving someone discretionary power over your money.

What to Expect from a Planner

A good financial planner will

• assess your existing financial situation (review your tax returns, income sources, assets, debts, savings and investments, wills, insurance policies, estate and retirement planning documents);
• identify your personal and financial needs and goals in order to develop a plan that's right for you;
• explain the pros and cons of various options and products (stocks, bonds, mutual funds, IRAs);
• assist you in carrying out your plan by referring you to other professionals as necessary (investment brokers, accountants, lawyers); and,
• periodically evaluate your plan with you to be sure that it is still in line with your current goals.