From income to investments, life goals to money woes, your first meeting with a financial planner will likely be full of questions. But keep in mind that the planner shouldn’t be the only one doing the asking. “It’s important to have the right fit with your planner, so that you’re as confident in their recommendations as you are comfortable talking to them,” says Johanna Turner, CPA, CFA, founder of Milestones Financial Planning. Even if the pro comes highly recommended by your sister’s friend’s cousin, she might not be the best match for you. Here’s what to ask—before you pick a planner.
1. WHAT CREDENTIALS DO YOU HAVE?
Anyone can say they’re a financial planner, because that’s not a regulated term, so you have to dig beyond the label. If someone’s a certified financial planner (CFP), it means they’ve completed extensive coursework in everything from cash flow issues to stock portfolio balancing, they passed a written exam, and they have at least some experience in the field. You might not need a CFP if you have a specific, targeted question (say, about insurance), rather than big-picture, holistic help. But either way, inquire about credentials.
2. WHO WILL I BE WORKING WITH?
This one might seem weird to ask, but you can’t always assume that the planner you’re meeting with would be your go-to resource. “The planner might have a solo practice or might work with a whole team of people,” says Sophia Bera, CFP, founder of Gen Y Planning. “You might really click with that planner, but then wind up working mainly with someone else at the firm or only seeing her at quarterly meetings. It’s good to ask, so you’re not disappointed.”
3. HOW ARE YOU COMPENSATED?
“Don’t be afraid to ask about fees upfront,” says Turner. That’s because there can be a huge range in how much planners charge, from $1000 a year for more straightforward finances or a less experienced pro to $5000 or more for more complicated situations with a super-experienced planner. If someone’s well outside your budget, you want to know that up front.
Also ask about how fees are structured: Most planners are commission only (meaning she earns a commission when she sells you, say, insurance), fee-only (charges by the hour, by a flat fee, or by a percentage of assets managed), or fee-based (charges a consultation rate and a commission). A fee-only planner is often considered the best choice, because you don’t have to worry that any recommendations are motivated by how much commission he’s making from the money move.
4. WHAT'S YOUR TYPICAL CLIENT LIKE?
Pick a planner who only deals with high-income, huge-portfolio clients when you’re making peanuts, and you might worry that you’ll be overlooked. Opt for someone who specializes in young Millennials when you have a complicated inheritance issue to figure out, and you might worry that your planner is out of his depth. “Many planners do have specialties, but even if they don’t, ask about the age of their typical clients or how often they handle whatever issue you’re facing,” suggests Turner. If the potential planner’s response leaves you feeling anything less than confident, it might be a sign to keep looking.
5. HOW OFTEN WOULD WE PROBABLY COMMUNICATE?
An annual review with your planner might suffice if your finances are on cruise control, but if the near future is filled with big goals (buying a house, starting a family, getting married, launching a business), you’ll want a planner who’s accessible more often. Does the planner typically meet with clients every quarter or twice a year? Does she blanche when you ask for monthly check-ins by phone? Don’t limit your questions only to frequency, either. “More planners are doing their meetings virtually, which makes it easier to meet frequently with someone even if they don’t live near you,” says Turner. Ask about the mix of email, phone, virtual and in-person communication. There’s no one-size-fits-all, but you want someone who’s going to fit your frequency needs.
6. WILL YOU BE MY FIDUCIARY?
“When someone is your fiduciary, they’re legally required to put your interests first,” says Bera. You might think all planners would have to do that, but some follow a suitability standard instead, which means they can suggest any product or investment that’s not clearly a bad fit for your situation. Sure, it can be uncomfortable to ask a tough question, says Turner, but you want to know exactly who they are and how they operate before you trust them with your money. “If the planner gets huffy or defensive with your questions, that’s not a good sign,” she says. But you can celebrate that you’ve spotted the red flag before committing to that planner.