Can You Trust Your Financial Planner?

A financial planner has a license to steal. Everyone needs a financial planner who can develop an integrated strategy that will help them achieve their financial goals. What better way than a financial plan that covers savings, budgets, investment, insurance, taxes, retirement, health, longevity, and other critically important issues.

Your need for a financial plan exposes you to a lot of unscrupulous people who use the planning process to sell investment and insurance products. This is the consequence of a major conflict of interest that impacts your relationship with any financial planner.

How risky is your use of a financial planner? Anyone can claim to be a financial planner whether it is true or not. Planners also have no minimum education or experience requirements. Taken to an extreme, a representative who is new to the industry and did not finish high school could claim to be a planner because it helps him sell investment and insurance products.

It gets down to who you can trust to provide a sophisticated plan with no conflicts of interest. Following are a few tips that will help you select a real financial planner.

Free Plans 

You should be extremely cautious if a planner says he will provide a financial plan for free. There are no free lunches in the financial services business. There are two ways planners are paid when the plan is “free”. The plan is loaded with investment and insurance recommendations. How does the planner know what to recommend in advance? His planning process is designed to produce cookie cutter solutions that contain product recommendations. So your planner did not charge for the plan, but he received $25,000 of commission from the sale of products that are recommended by the plan.

Tip: Do not select free plans from a sales representative or agent. It is a scam. 

Cookie Cutter Plans 

Make no mistake; most financial plans are produced by software. The software may be very sophisticated and cost thousands of dollars. Or, it can be unsophisticated and cost $99. The planners collect information from you and input it into the software that spews out a hundred pages of recommendations and support documentation. Most planners know you may equate number of pages to sophistication.

How can you determine the sophistication of planning software? There are two ways. Both take a little time on your part. First, ask multiple representatives, agents, and advisors to provide plans and compare them to each other. The better plans should standout. Second, ask the planners for the names of the sources of their software and check them out on the Internet. Look at the features of each type of software and the number of financial planners using the software.

Tip: Do not select planners who use cheap software that produces cookie cutter planning solutions.

Planning Certifications 

There are three planning certifications or designations that increase your odds of receiving a higher quality plan. The best known is Certified Financial Planner™ (CFP®). CPAs who hold Personal Financial Specialist (PFS) designations are also experienced planning professionals. The insurance industry also has a planning designation.  The Chartered Financial Consultant (ChFC) is its source of planning knowledge.

Tip: Certifications and designations are your only way of measuring planning knowledge.


There are professionals who produce financial plans for hourly fees that range from $75 per hour to $300 per hour in major cities. Other professionals prefer charging fixed fees, for example, $1,500, $2,500, or $5,000. And, there are financial planners who integrate the cost of the plan into an asset-based fee (% of assets) if you buy investment services from them.

Your biggest risk exposure occurs when the advisors’ only method of compensation is commissions from the sale of investment and/or insurance products. These planners are sales reps and they may view plans as loss leaders that convince you to buy their products.

Tip: Avoid financial planners whose only method of compensation is commissions.


Most financial planners want to help you implement the plans that they produce for you. Why? It is hard to make a good living by only providing planning services. Reps can make much better livings if they produce the plan and help you implement the recommendations of the plan. Only a small percentage of planners focus on the planning process and leave the implementation to others.

Tip: If you want to be ultra-cautious limit your selection to professionals who do not implement plans.

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