Planning for retirement can be an intimidating prospect. How much money will you need? How long should you plan for? How can you be sure your money won't run out? With so many questions and variables, it's best to turn to professional help. But how do you find a financial planner you can trust, who understands your needs and has your best interests at heart? Here are a few questions you can ask to help you select the right personal finance professional to guide you through your retirement planning.
What credentials does the planner have?
There are a number of licenses, certificates and other credentials that a finance professional might have. One such designation to look for is CFP, short for Certified Financial Planner. This denotes someone associated with the Financial Planning Association, which holds its members to a high standard of competency. Others to be mindful of include ChFC (Chartered Financial Consultant), CPA/PFS (Certified Public Accountant/Personal Financial Specialist) and CLU (Chartered Life Underwriter), all of which must meet a high standard of qualification in order to become certified.
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Is the person a fiduciary?
A fiduciary is someone who is legally authorized and appointed to manage another person's financial assets for that person's benefit, and not for personal profit. In short, a fiduciary is legally required to put the client's best interests first -- something not all financial professionals are required to do.
How does the financial planner charge?
Do they receive a commission, or do they charge a fee? Many large investment and financial planning companies pay their agents a commission based on which of the company's own financial products you buy. While the products might be beneficial to your retirement planning, the fact remains that someone working on commissions might be more concerned with what's best for their paycheck than with what's best for your personal finances. On the other hand, finance experts who charge a fee, whether it's a flat fee, an hourly rate or a percentage of your investment assets, have no incentive to push a product on you that might not be in your best interests.
What services do they provide?
It's important to know your specific personal finance needs, so you can assess whether a financial planner is fully equipped to meet them. Do you need someone to help you put together an aggressive investment portfolio to meet your goals? Would you be comfortable with someone who takes a hands-on approach to managing every aspect of your finances, or would you prefer someone who can coach you from the sidelines, helping you stay on track as you manage your own portfolio? Are there any tax or estate planning requirements you need? Answering questions like these before you begin your search can go a long way toward making sure the person you hire is a good fit.
Be sure to ask these questions as you speak to prospective personal finance professionals, so you can be confident that your retirement future is in good hands.
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Jean Marie Bauhaus is an author who writes on a variety of topics, including personal finance and retirement planning.