For many people, choosing the right financial planner can be one of the most important decisions they make. After all, not only are you putting your money in their hands, but you’re trusting them to make sound financial decisions on your behalf when it comes to topics like investing, retirement planning, and tax management. But how do you know if you’ve found the right one? Where do you even start looking? In this ultimate guide to choosing a financial planner, we’ll go over what questions to ask when interviewing prospective candidates and provide some helpful resources along the way.
1) How Do I Pick the Right Financial Planner?
So, you’ve decided it’s time to get some help with your finances—great move! But how do you pick out an advisor? With so many options on where and how to get advice, choosing who will help turn your financial future around can be overwhelming.
What Type of Financial Advice Will You Need?
There are lots of different kinds of financial advisors out there from financial planners to discount brokers. Whichever type is best for you depends mostly on what kind of financial advice and service level they provide:
Do you need ongoing help with investment research or ongoing management?
Do you just need help creating and implementing an overall retirement plan or do you need ongoing tax preparation services too?
What types of services or tools might be most valuable in helping your portfolio grow?
When thinking about these questions keep in mind that not all advisors provide every possible service; before choosing one talk to them about what they offer and consider whether their particular mix would meet your needs. If it doesn’t, then know that there may be another advisor that is better suited for you.
2) What Does It Mean to Be Registered?
Being registered is like passing a test of sorts. Registered financial planner (RAs) are required to pass exams on certain topics, like securities regulation and portfolio management. They’re also held to certain ethical standards that aren’t required of unregistered advisors; for example, they must act in your best interest at all times. Still, you should be sure that any financial planner you hire—regardless of whether he or she is registered—knows how to invest your money effectively. The right planner can help you achieve financial goals, while an ineffective one could put your finances in jeopardy. Use our advice below when searching for an RA in San Diego so you can avoid making mistakes when choosing one.
3) Which Type of Registration Should I Choose?
Not all financial advisors are created equal—in fact, they can be quite different. The type of registration (or license) an advisor has will tell you what kind of advice they can give and who is allowed to work with them. Different types of registrations exist for different reasons, and not every type is right for everyone.
The three main categories are:
- SEC Registered Investment Advisors (RIA)
- State Registered Investment Advisors (RIAs)
- Fee-only Registered Investment Advisors.
The category that’s best for you will depend on what you need from your financial planner, so let’s take a closer look at each one Number 1 – This means your financial planner holds a current and valid registration or charter with their state regulating agency for advisory services related to securities. It shows that they have passed exams as part of getting licensed as well as continuing education requirements for professional development. Being registered also shows independence from any brokerage house or bank which may imply higher trustworthiness to some consumers.
4) How Much Money Should I Invest?
This is arguably one of your most important financial decisions, so you need to choose wisely. According to NerdWallet’s retirement calculator, if you start saving $200 per month at age 25 and earn an average 7% return on investment annually until retirement, you’ll have $1 million. Increase that amount by just $100 per month and you’ll have $2 million. Here are four factors to consider when deciding how much money to invest.
5) Who Can Be My Financial Planner?
Before you choose a financial planner, ask if they’re properly licensed. Make sure they work for a company that has been registered as an investment advisor with the SEC or is licensed as an investment adviser by your state regulator. In addition, make sure your advisor is registered as an investment adviser representative with FINRA and possesses at least Series 7 & 66 licenses. If not, they may be violating securities laws by giving advice without proper credentials. The last thing you want is someone who isn’t qualified to handle your hard-earned money!
To avoid hiring an unqualified financial planner in San Diego, here are some questions to ask:
- What do I need to bring with me?
- Do you provide tax services?
- How long have you worked here?
- How much experience do you have?
- What's your background?
- Are there any charges I should know about up front?
- If I have more questions, how can I get in touch with you?
- What else can you tell me about yourself and your background/experience/qualifications/track record?
