Advice on finding a financial planner?

bmo88 · September 2015

Hi Everyone,

We are getting to a point where we would like to hire/get a financial planner. Given our income level and ability to invest (retirement and discretionary income), we feel like its time to seek professional guidance.

This is not an area we are familiar with at all.

So, questions to those with financial planners:

How did you find your financial planner? How many did you meet with/consider?
How did you decide they were the right one for you?
What kind of cost structure do you have? Fee based or another set up?
Any advice/tips?

Thanks for your insights in advance!

hoffse · September 2015

Finding somebody who charges by the hour is the way to go. It should cost less overall than somebody who is commissions-based, and then they aren't incentivized to sell their own products to you.

I've never hired one, but I think it's similar to attorneys who charge by the hour vs. attorneys who get a cut of the winnings.

I just see a huge conflict of interest when your financial planner (or attorney) has a personal stake in your money. Sometimes the best advice is to do nothing or make no change, and they aren't likely to tell you that if they have a stake.

I would - personally - look for somebody who would let my goals govern the direction of the financial plan. That seems obvious, but it's easy to get entrenched into one way of viewing things and to consider that your way is the "right" way because you are the "expert." Find somebody who either shares your personal philosophy when it comes to money or who is willing to consider multiple angles so that your goals are in the driver's seat. There's no one-size-fits-all approach.

Also, if they did not ask me basic questions about things like risk tolerance, I would not hire them. The plan needs to match your level of risk tolerance, not theirs.

brij2006 · September 2015

I personally use one from Dave Ramseys' endorsed ones. Just go to his website and click on "ELP's."

The way I look at it, they have helped regular people become millionaires. Not by doing some crazy hat tricks with their money, but by helping them get a gameplan for retirement. I trust ours with everything, and never have to question or 2nd guess what he does. I also like that they have the heart of a teacher. I'm no whiz at investing, and he teaches me what and why he's doing what he is. He refuses to let you leave his office unless you fully understand what your money is doing and why.

Mustard76 · September 2015

hoffse said:
Finding somebody who charges by the hour is the way to go. It should cost less overall than somebody who is commissions-based, and then they aren't incentivized to sell their own products to you.

I've never hired one, but I think it's similar to attorneys who charge by the hour vs. attorneys who get a cut of the winnings.

I just see a huge conflict of interest when your financial planner (or attorney) has a personal stake in your money. Sometimes the best advice is to do nothing or make no change, and they aren't likely to tell you that if they have a stake.

I would - personally - look for somebody who would let my goals govern the direction of the financial plan. That seems obvious, but it's easy to get entrenched into one way of viewing things and to consider that your way is the "right" way because you are the "expert." Find somebody who either shares your personal philosophy when it comes to money or who is willing to consider multiple angles so that your goals are in the driver's seat. There's no one-size-fits-all approach.

Also, if they did not ask me basic questions about things like risk tolerance, I would not hire them. The plan needs to match your level of risk tolerance, not theirs.

I actually want my advisor to have a vested interest in my returns. I don't like to pay commissions in each trade. I do like managed accounts where I pay my advisor a percentage for managing my portfolio. It puts us on the same side of the table. The more I make, the more she makes. If I paid by trade, I would be less inclined to make trades, whereas a fee based system allows me to trade as much or as little in my account as I like.

hoffse · September 2015

Mustard76 said:

Finding somebody who charges by the hour is the way to go. It should cost less overall than somebody who is commissions-based, and then they aren't incentivized to sell their own products to you.

I've never hired one, but I think it's similar to attorneys who charge by the hour vs. attorneys who get a cut of the winnings.

I just see a huge conflict of interest when your financial planner (or attorney) has a personal stake in your money. Sometimes the best advice is to do nothing or make no change, and they aren't likely to tell you that if they have a stake.

I would - personally - look for somebody who would let my goals govern the direction of the financial plan. That seems obvious, but it's easy to get entrenched into one way of viewing things and to consider that your way is the "right" way because you are the "expert." Find somebody who either shares your personal philosophy when it comes to money or who is willing to consider multiple angles so that your goals are in the driver's seat. There's no one-size-fits-all approach.

Also, if they did not ask me basic questions about things like risk tolerance, I would not hire them. The plan needs to match your level of risk tolerance, not theirs.
I actually want my advisor to have a vested interest in my returns. I don't like to pay commissions in each trade. I do like managed accounts where I pay my advisor a percentage for managing my portfolio. It puts us on the same side of the table. The more I make, the more she makes. If I paid by trade, I would be less inclined to make trades, whereas a fee based system allows me to trade as much or as little in my account as I like.

I think OP is talking about a financial planner that will look at all of their assets and all of their liabilities and help develop a strategy for balancing them to accomplish certain goals. When I say to avoid commissions-based planners, I mean avoid those people who are trying to sell you products where they get a cut. They have every reason to sell you product A, even if product B is better suited to your plan. Product A may give them a higher commission than product B.

Some fee-based planners are paid based on a percentage of the entire managed portfolio. That can work if you use their services a lot or if the portfolio they are managing is very small. Otherwise, you probably save money paying per trade and then paying somebody by the hour or on a flat rate for a portfolio review. You have to do the math on it. I don't know about you, but I only trade on my investments about once a year, so paying per trade is cheaper for me.

I just think it's a huge conflict when some products pay commissions to financial planners based on selling that product. It's like when the commissions-based lawyer pushes you to settle early and often because she knows she's going to get her 1/3 cut in settlement, vs. risking it all at trial... even if a trial would be in the best interests of the client. Personally, I think those kind of fee arrangements in the legal field are borderline unethical. That's why I have a similar problem with them in the financial world.

Advice on finding a financial planner?

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