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Working with a Pro: Preparing for Your First Visit

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Working with a Pro: Preparing for Your First Visit

 
What services do you offer? What a financial planner offers is based on credentials, licenses and areas of expertise. Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless they are registered with state or Federal authorities. Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or taxes.
 
How do you charge for your services? Professional planners will provide you with a financial planning agreement that spells out the services they provide and how they’ll be compensated. Payment can happen in one of several ways:
  • Salaried planners are actually employees of a firm, and you help pay their salaries through fees or commissions you agree to pay.
  • Direct fees to the planner through an hourly rate, a flat rate, or on a percentage of your assets and/or income.
  • Commissions paid by a third party from the products sold to you based on the planner’s recommendations. Commissions are typically a percentage of the amount you invest based on those recommendations.
  • A hybrid of fees and commissions based on services. A planner may charge a fee for designing a comprehensive financial plan and occasional visits and calls to review it, while commissions might come from products they sell that you invest in.
 
Do you have any potential conflicts of interest? It may seem like a rude question, but the best planners expect this one and are prepared to make disclosure. Obviously, if a planner profits from the sale of investment products to you, she must spell that out. Some may receive indirect fees from the mutual funds selected (called 12-b-1 fees). Others may receive a commission for placing certain business with a provider of a financial product as in the case of insurance or alternate investments like limited partnerships. The method of compensation may be an inherent conflict of interest since a financial salesperson may be motivated to steer you toward a product purchase that pays the highest compensation for the sale. Fee-only financial professionals do not receive any compensation from investment product sales which may result in more objective advice not tied to a particular product.
 
How do you feel about teaching and training? One of the primary benefits of having a financial planner is education about the moves you are making or may potentially make. Don’t view a planning relationship as tossing someone your finances so you won’t have to deal with them anymore. You will still need to be involved in this relationship and a good planner will help educate you. While you’re not expected to be an expert in all financial matters, you will at least be able to make informed decisions with a base of knowledge. As long as you’re paying for their services, make sure you get a long-term education out of it.
 
(For a more detailed list, there is a useful brochure located at the investor education portion of the CFP Board’s website with ten questions you should consider asking any prospective planner).
 
When you select a planner, they’ll give you a list of documents and information to bring in for your first meeting, and generally, it will be detailed on a checklist that may include:
 
An income and expenditure checklist: This is a summary of current and projected income. You’ll need to bring or detail:
 
Income
  • A current pay slip
  • Profit and loss statements for business income
  • Pension income statements
  • Statements of non-investment income
  • Family trust distribution documents
  • Tax returns
  • Annuity, maintenance agreement statements
         
Expenses
  • Home: Mortgage, rent statements, utilities, household repairs, insurance, appliance purchases, landscaping or house cleaning
  • Transportation: Gasoline, car loan, public transit expenses and parking
  • Food: Grocery and restaurants
  • Medical: Doctor, dentist and prescription bills
  • Education: Tuition, school fees
  • Child care: In-home our outside-the-home care
  • Personal grooming: Clothing, shoes and accessories, hair, makeup
  • Pet care: veterinarian, food and grooming bills
  • Insurance: Health, life, auto, disability
 
An asset and liability checklist: This is a summary of what you own and what you currently owe. You’ll need to bring or detail:
 
Assets:
  • Principal residence
  • Vacation home
  • Investment property
  • Bank accounts
  • Investments
  • Collectibles and personal property
  • Automobiles, other vehicles
 
Liabilities:
  • Mortgages
  • Credit card debt
  • Auto loans
  • College loans
  • Business loans
 
You should also be prepared to engage in a detailed and wide-ranging conversation that covers matters related to your attitude and experiences with money and financial decision-making. Questions like how you choose investments or what kinds of information resources you consult or what risk means to you will be important to provide the planner with insight into your decision-making process and behavior type. Armed with this information, a good planner will then be better able to make appropriate recommendations for your situation.
 
 
March 2009 — This column adapted by Steve Stanganelli CFP® , a local member of the Financial Planning Association.
 
About Your Advisor
 
Steve Stanganelli, CRPC ®, CFP ®, a financial advisor and former banker for nearly two decades, is a CERTIFIED FINANCIAL PLANNER ™ Professional and a CHARTERED RETIREMENT PLANNING COUNSELOR (sm) who helps clients make smarter money moves to live richer lives more simply in retirement and all the points along the way. Steve’s practice specializes in assisting clients in life-changing business and life transitions. He consults in the areas of retirement income planning, low-cost index investment management, divorce assistance, college aid planning and asset protection.
 
Steve is a fee-only, board-certified financial planner and investment manager who has been awarded a five-star quality rating by the independent Paladin Registry.
 
Steve frequently writes and presents on these topics which can be found also at his blog at www.moneylinkpro.wordpress.com .
 
 

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