Top Tips on Picking the Right Financial Planner - Quicken Loans Zing Blog

More than one million individuals and married couples filed for bankruptcy in 2013, according to U.S. Bankruptcy Courts statistics. Some of these cases were due to recklessness, but others can be attributed to bad investments and simple misfortune. The likes of Bernie Madoff and other unsavory Wall Street types spooked many Americans to the point of never trusting financial advisors again. A CFA Institute and Edelman Investor Trust study found that only 52% of investors trust investment firms to act in an honest manner.

Due diligence and a little common sense can lead you to a financial advisor who not only has your best interests in mind, but can improve your economic outlook.

DIY vs. Hiring an Advisor

A Deloitte Center for Financial Services study found that 57% of those surveyed said they would rather handle their own retirement planning than trust a third party. The problem with handling your own finances is similar to why a good writer still needs an editor—it’s difficult to judge your own work without a natural bias toward your own abilities.

DIY investors may become far too conservative when stocks plummet, and avoid one of the best vehicles for a high return on investment. Contrarily, when the Dow and S&P 500 are performing like they have been lately, DIYers feel it’s too expensive to buy in. The belief is that prices will ultimately come back down, resulting in a net loss.

A second voice is beneficial to investors of all levels. Remember, you ultimately control your money and don’t necessarily have to follow every price of advice given to you. For those adamant about self-advising, consider hiring someone on an hourly basis to get a second opinion.

Warning Signs

There is no magic formula for finding the perfect financial planner, but you should look for certain things during the process of elimination.

Never do business with an advisor who cold calls you to offer his services. Make sure anyone you hire is a certified financial planner (CFP) with credentials readily available. These individuals have passed rigorous exams and must commit to continuing education as often as the board sees fit.

A good advisor will ask you a lot of questions without being prompted. He should ask about your health to determine how much time and money to commit to future medical care. He should also ask about the amount of debt you’re carrying, as well as annuity and structured settlement payments you may have sold to a company like J.G. Wentworth.

And, any advisor willing to see you without your husband or wife should be immediately crossed off the list.

Opinion vs. Fact

When advice is given to you, it should be based on peer-reviewed journals and evidence-based conclusions, as opposed to speculation and opinion. The planner should either be able to show you a study in a journal or put together charts, reports and spreadsheets backing up what he is telling you to do with your money.

The firm should operate under a fiduciary standard of care, not a suitability standard. The previous guarantees the advisor is acting under his legal duty to offer advice only with your best interests in mind; the latter may involve a product that will work for you but isn’t necessary best for you. This is particularly the case when the advisor or firm is personally invested in a trade. Those practicing a fiduciary standard will let you know of these biases beforehand.

Choosing a financial planner is not an exact science. But taking extra care to vet potential suitors will maximize your chances of landing a good one.


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