How to Choose a Financial Planner: 5 Things That Actually Matter
In the medical field, you can’t go around practicing medicine if you don’t have a medical degree. Unfortunately the financial services industry can’t say the same.
Technically, anybody can set up a website and call himself or herself a “financial advisor” or a “financial planner” without getting any type of certification.
(In New Jersey, we call these people phonies, fakes, and a few other phrases that aren’t fit for print.)
Is There a Difference Between a Financial Advisor and a Financial Planner?
The vague term “financial advisor” was essentially invented by big national firms when they didn’t want to call themselves stock brokers anymore. The “advisor” can mean everything and nothing and all that’s in between. It’s kind of like a consultant.
Person 1: What do you do for a living?
Person 2: I’m a consultant.
Person 1: Interesting…. So what does that entail?
Person 2: I consult.
Person 1: Interesting…. So what do you consult on?
Person 2: My expertise.
At least the term “financial planner” implies that at some point, a professional is going to construct a tangible plan that will drive the short and long-term financial behaviors of the client, should they choose to implement it. Financial planners can be licensed, which is CRITICALLY important (See #1 below).
Truth be told, the terms “financial planner” and “financial advisor” are used interchangeably by most of the industry now, so that aspect really doesn’t make a difference.
Here’s what DOES make a difference when selecting a financial planner/advisor:
1) Look for a CFP® designation
Certified Financial Planners (CFP®) are licensed and regulated by the CFP® Board. They have looked the Certified Financial Planner Board of Standards exam in the eye and come out the other side successfully.
CFP® professionals must pass the comprehensive CFP® Certification Examination, pass CFP Board’s Fitness Standards for Candidates and Professionals Eligible for Reinstatement, agree to abide by CFP Board’s Code of Ethics and Professional Responsibility and Rules of Conduct which put clients’ interests first and comply with the Financial Planning Practice Standards which spell out what clients should be able to reasonably expect from the financial planning engagement.
They also have to take Continuing Education Credits to stay current on the latest trends and best practices of the industry, or their license is revoked.
If you feel weird about going to a doctor without an M.D., you should absolutely feel weird about going to a financial planner without a CFP®. Don’t do it.
Learn more about John Bodnar, CFP®, CIMA®, here.
2) Look for a net worth minimum
Some financial planning firms require clients to have a minimum net worth before they can even get a foot in the door. It’s best to look up any minimum net worth requirements early in your search, otherwise you might be wasting your time.
Bodnar Financial Advisors does not have a net worth minimum. We believe everyone should have the opportunity for sound financial education and guidance, regardless of what their starting balance is.
Learn more about Bodnar Financial here.
3) What kinds of promises are they making?
Any Certified Financial Planner® worth doing business with knows that the most dangerous word in the industry is “guarantee.” If your financial planner/advisor is making promises right out of the gate for future results, the only “sure thing” is that you should run far, FAR away.
Success is ultimately determined by the client, not the financial advisor. Certified Financial Planners® are there to give you guidance and to motivate you to stay on track implementing the financial plan you designed together. But ultimately, as with most everything in life, the results you get out of your financial strategy are determined by your behavior and what you put into it.
4) Do you like the person?
The “heebie jeebies” are a very real thing.
If you get a weird vibe from your financial planner/advisor, it’s not going to work out. If your advisor makes you feel ignorant about financial issues or self-conscious about your financial lifestyle, it’s not going to work out. If you feel like you can’t trust your advisor enough to tell them your whole story, it’s not going to work out.
Your net worth is where the rubber meets the road in financial planning. Naturally, you want to see that go up every year- that’s the dream. If your financial planner can’t motivate you to want to grow your net worth enough for you to actually put in the work to make it happen, you need another advisor.
5) Shop around
It takes 3-6 months for the average home buyer to find a property. Eyewear companies give consumers the opportunity to try-on at least 5 pairs of glasses at home before making a purchase. What’s my point? Finding a financial advisor shouldn’t be an impulse decision.
Selecting a Certified Financial Planner® sets the tone for your entire experience with financial education and the maintenance of your financial health. Don’t rush the process, shop around!
Learn more about Bodnar Financial here.