A Personal Finance Guide

Is Your Financial Planner Working For You?

As with many companies today, brokerage firms are struggling in this economy. Some of the large financial companies, previously seen as staples in a powerful industry, are fighting to stay in business. As a consequence, their stockbrokers have to worry about their own financial security in addition to their clients’.

This can create an issue for those clients; people who want personal, focused attention from those to whom they are intrusting their money and their futures.

For this reason, it is important to determine if your financial planner, regardless of the firm’s reputation and size, is working for you and your best interests, or if he or she is trying to “sell” you on the latest bonds, mutual funds and tactics that will net the highest commissions or bonuses.

To help with this task, a list of 10 important considerations is presented below.

1. Is your financial planner a Certified Financial Planner? Securing this designation means the planner has passed certain exams and is well qualified to deal with clients’ finances.

2. How does your financial planner accept payment?

a. Commission – Receives an undisclosed percentage of any funds, investments, trades, etc. made on your behalf

b. Fee-based – May work off an established percentage or hourly or yearly fee, but could also accepts commissions, kick-backs, bonuses, etc. from employers or other sources

c. Fee-only – Compensated solely by a pre-determined fee for rendered services, instead of commissions, rebates, awards, bonuses, or any other forms of compensation

3. Did your financial planner sit down with you at the beginning of the relationship and try to get to know you and your financial goals and needs?

4. Does your planner make decisions based on your goals and level of risk, or based on what is “hot” at the time, or will earn him or her the most income?

5. Is your financial planner a member of NAPFA, an organization of fee-only fiduciaries committed to putting their clients’ best interests above their own?

6. Is your planner independent, meaning he or she works only for him or herself and any clients, or does the planner work for a large firm that is beholden to executives or shareholders and could have earnings demands that must be met?

7. If your planner does work for a company, have you thoroughly researched the company and its successes, failures, and typical business practices?

8. How many clients does your financial planner serve? How much time and energy does he or she give to each client?

9. How often do you hear from your planner? Do you feel you are always the one making contact and checking in, even when things are going badly?

10. Do you get consistent updates from your planner on the performance of your investments, and does he or she take the time to explain what everything means?

Taking the time to review these items, and seeing how your financial planner matches up, will help determine if he or she is the right planner for you. Decide what you want and expect in a planner, and then analyze whether that is what you are getting. Be cognizant that you have every right– in fact it is your responsibility — to change planners if you feel it is warranted.

If during this particularly difficult economic period you feel you should be receiving a higher level of service than you are, it may be time to consider switching to a new planner.

You may be content, and if so, that is the perfect scenario for everyone involved. However, if you need a change, now is the ideal time to make that assessment.

Martin Hopkins is a fee-only Registered Investment Advisor, Certified Financial Planner, and board member of the Northeast division of NAPFA. In addition, he is a member of the Financial Planning Association and the National Association of Tax Professionals. Martin has more than 25 years experience in the financial industry and started his career as an attorney specializing in financial services law.