Every year, National Association of Personal Finance Advisors (NAPFA) and Kiplinger’s Personal Finance get together for their Jump-Start Your Retirement Plan Days, where you can talk to a fee-only advisors from NAPFA. It’s a pretty good resource if you take advantage of it, it’s not every day you can talk to a financial advisor for free without the pressure of them trying to sell you something (one reason why fee-only beats commissioned advisors).

NAPFA is putting together a NAPFA Consumer Education Series they bill as:

… designed to help consumers across the country better understand personal financial matters. Presented by the National Association of Personal Financial Advisors (NAPFA), each session will be led by a NAPFA-Registered Financial Advisor who commits to the highest of standards in the financial planning industry. Many of our instructors are authors, educators and leaders in the industry.

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Anyone can call himself a financial planner.

Think about that for a second… anyone can call himself (or herself) a financial planner.

Given that, and the alphabet soup of certifications and titles, how in the world is someone like your or me supposed to effectively sift through the bums to get to the gems? I spent a few hours talking to a “financial planner” several years ago and while he was a nice guy to talk to, he did more than offer up a few high priced mutual funds and insurance ideas. While the talk did introduce me to the idea of disability and term life insurance, I wasn’t really interested in learning more about them at the time and so our relationship ended. Was he a good planner? I have no idea because I have no way of determining that.

Fortunately, a two year old article on how to evaluate a financial advisers from MarketWatch is still pretty accurate. They recommend that you review three factors in a financial adviser:

Credentials

First, you have evaluate their general credentials such as years of experience, number of clients, college degrees, and certifications. A planner should have a CFP (certified financial planner) certification from the CFP Board of Standards, Inc. and you can confirm this by using their search tool. An adviser should be an RIA (registered investment adviser) if they have their own firm or be an IAR (investment adviser representative) if they are independent contractors. RIAs and IARs will be registered with the Securities and Exchange Commission, you can look them up at the Investment Adviser Search tool. An IAR or an RIA is not a certification, it’s merely a sign that the individual or firm is registered with the proper government agencies. It’s mostly paperwork, but something that should be done by reputable firms (Thanks Lily!).

Ethics

Get the adviser’s or planner’s CRD (central registry depository) number and look them up at the FINRA (Financial Industry Regulatory Authority) BrokerCheck tool. This can tell you if there are any problems with the person you’re looking to deal with. Another suggestion they give is to check to see if your adviser has a criminal record because a criminal record doesn’t prevent someone from obtaining a securities license (surprising, but true). That being said, a criminal record doesn’t necessarily mean the person is a bad adviser or hasn’t been reformed but to each their own.

Business Practices

Ask how the adviser is paid. The rule of thumb is that you always want to pay an adviser for their time, i.e. a fee-only adviser, rather than someone who earns a commission based on the investments you choose. In my case, my adviser a few years ago was free but earned a commission when I bought insurance or mutual funds through him. That always brings up the question of conflict of interest, is he steering me towards a product because it’s the best one for me or because he earns a commission? After figuring out compensation, talk about how you will conduct business. How often will you meet, how often will you talk on the phone, who else will join you in meetings, etc. Get a good feeling for how things will proceed.

Lastly, they recommend that you don’t choose someone based on their personality or sales skills, which I agree. However, after you’ve done your due diligence in the three areas outlined above, I think it’s important that you do pick someone who you can get along with. It should be the last gate in the decision making process, not the only gate.

Jeremy at GenXFinance just pointed me to an article he wrote for About.com, “the best article ever written on the subject,” Finding a Financial Advisor that I found pretty informative. (Best? I don’t know… but pretty good )

Do you have an adviser or planner (or are you a adviser or planner) and have any insight into this?

(Photo: pgoyette)

A few years ago I met with a financial planner who was probably the same age, or a few years older, as me. We chatted a little, discussed some of my future plans, and basically he tried to sell me on some products. It was all in all not exactly a valuable meeting but part of that was my fault, I didn’t really have future plans. I had just graduated college, started getting my first few paychecks, and I had no plans for anything. I was just living life as best I could now that I had some real money. If I met with a financial planner now, it’d probably work out a little differently.

This guy lost $6M overnight. David Shorr had been a long time employee of Lehman and amassed quite a little collection of shares, all of which were rendered worthless on Monday. David Shorr works as a “wealth adviser,” a senior VP, at Morgan Stanley now and it made me wonder if I’d actually want the guy being my adviser (not that I’d be able to afford him!).

What if you found out that your financial planner was bad about his or her own finances? Or a financial advisor or broker whose investment portfolio was a mess? Would that change your perception of his or her advice? Would you drop them if you discovered they were bad?

I probably would.

I agree with the argument that being a good financial planner has nothing to do with executing a financial plan. A good financial planner needs strong organizational skills, good analytical skills, and a whole host of other skills that have nothing to do with sticking with a plan. A good planner can establish a savings plan that can set you up nicely to meet your future needs, given some assumptions, but it’s ultimately up to you to save. The financial planner with bad finances could simply be bad at that last part, the saving part. I agree with all that.

But would you hire a landscaper if his front yard looked like it hadn’t even been mowed in a year?

When it comes to long term financial planning, my wife and I don’t really have one. We have some long term goals but we don’t have any dates pegged for those goals (which include starting a family, going back to school, buying a new home, etc.), which is about as useful as having no goals at all. That being said, it was about time we sat down and put pen to paper so we would stop committing the fourth deadly sin of personal finance – failing to plan.

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I had a lackluster experience with an alleged financial planner and I’ve read many articles detailing how you should find a financial planner, what you should ask him or her, and everything else you need to do to make sure you don’t a raw deal in the process. I’m sure many of you have read those same articles warning you about how you need to find fee-only financial planners or sleep on their advice. Well, I wanted to highlight a columnist at CNNMoney called “the Mole.” The Mole is an actual practicing financial planner who gives you the full skinny on what you should do to get the right financial planner.

Here are the one’s I felt were valuable reads:

• When you should dump your adviser – some red flags that your financial adviser isn’t up to snuff.
• Are investment newsletters worth it? – “You’d be much better off just throwing the money in the nearest dumpster than buying these newsletters and risking a big chunk of your nest egg in following the newsletters’ advice.” (he’s very honest)
• What a good financial adviser should be doing for you – Discussion on the various aspects financial advisers should help you with.
• Four good questions to ask your adviser
• What your adviser doesn’t know might hurt you

You can find all of The Mole’s articles here.

Back in March I met with a financial planner and found the entire experience a little underwhelming. I thought I’d be meeting with a professional, someone who could give me some good solid advice for the way forward, but I got little more than a few pitches for insurance and some high cost mutual funds I wouldn’t touch with a ten foot pole. That post garnered twenty-seven posts with people chipping in on their experiences and I was curious if there was something more to financial planning than selling insurance and mutual funds?

Was I talking to the wrong type of financial planner? There are so many certifications for people in the financial world that it’s hard to keep them straight. I knew about Certified Financial Planners but there are Chartered Financial Consultants, Chartered Investment Counselors, Certified Public Accountants and Personal Financial Specialists. Each one focuses on a different niche in the personal finance world and I start to wonder if I talked to the wrong person… or did I?

What’s your take on financial planners? Any advice on what I should do?

So my friend Perry met with a financial planner named Andrew, as a favor because Andrew was his father’s friend’s son I think, and sold me out to him when the planner asked for some names of his friends who were interested (don’t worry, when it was my turn I didn’t give out any names). Anyway, I met with this financial planner (really, he was like a trainee or something, I met with this other guy Brian) the other day in a Baja Fresh and we got to talking about what it was he could do for me. He wasn’t an independent, he was part of some larger company that I hadn’t heard of until that day, and so he gave me his usual financial planner talk and we got to discussing my particular financial situation and what he could do for me.

Our talk first began with a look at my retirement assets and his eyes basically bugged out of his head when I told him how much I had saved in my 401K and Roth’s (A mixture of fortuitous emerging market fund performances, diligent saving, and starting a Roth [thanks Dad] when Ito meet face to was in college resulted in a larger than average for my demographic amount in my retirement savings, heavy emphasis on emerging market fund performances) and he told me I was probably doing okay and didn’t need much help there. I’m not anecdotally telling you this because I want you all to think I’m this wonderful retirement planner and I’m super responsible and awesome, I was just surprised that the guy didn’t have much to offer short of “save for retirement” and “save for retirement, here are a few funds you might want.” (none of which were offered by his firm, they were American Century funds) You would think that a financial planner would have something else to tell you outside what mainstream media already tells you, but I suppose a person telling you is better than a newspaper article.

The second part revolved around insurance policies, he told me that getting disability insurance was crucial because you never know what’s going to happen. He did offer one good nugget of information, that you should get your disability insurance from someone other than your employer in the event that you leave your job because then you won’t have to change insurers. I listened attentively but, like all brash twenty somethings, I pretty much dismissed the idea of disability insurance or life insurance because I didn’t see it as really necessary for someone as young as me. Is it foolish? Perhaps. Is it irresponsible? I don’t believe so.

So, that was my first experience meeting with a financial planner who didn’t even buy me lunch and it’s probably the last time I’ll meet with a financial planner unless something drastic happens.