By Joni Lindquist

With the baby boomer generation barreling into retirement, the need and value of personal financial planning has increased.  Why?  In large measure, the baby boomers will be the first generation unable to rely on pensions to help fund their retirement.   Further, there are concerns over the long-term viability of Social Security. In a recent survey by Gallop, 64% of Millennials don’t expect to collect anything from Social Security.  Individuals are now more accountable to plan for their own financial health and success than previous generations.  Because of this, more consumers are seeking professional help with financial planning.  As they do so, they may face a confusing landscape.   Pretty much anybody can hang out a shingle and call themselves a “financial planner” or “financial advisor.”

How to choose?  First, keep in mind that personal financial success is more than planning for your retirement.   All of us have various goals we want to accomplish and money is merely a tool to help us reach them.  Good financial planning starts with goals then outlines a process to take action.  Financial planning is on-going and should help you make good decisions regarding earning, spending, saving, building, and protecting your money.

When selecting a financial advisor, you should ask the candidate(s) these questions:

  1. What is the breadth of your services?
  2. Do you have a fiduciary standard?
  3. How are you compensated?
  4. What are your credentials?
  5. What is your approach?

1. Breadth of Services – I often meet people who believe that financial advisors are solely involved in handling investments.  Granted, some advisors are largely focused on investments.  While investing has become more complicated with a plethora of choices, investing is merely one component of financial planning.   Focusing only on investments may limit your ability to achieve financial success.

A thorough financial planning process will help you with a cohesive plan that can include (but is not limited to) savings strategies, understanding and managing your cash flow, tax planning, estate planning, retirement planning, investment management, and insurance strategies to protect your assets.   Check to make sure the financial advisor you are considering can help you with multiple financial areas.   To learn more, check out:

2. Fiduciary Standard – Much has been written in the press recently about Obama’s move to extend the “fiduciary standard” more broadly in the financial services industry.  As the law currently stands, broker dealers, insurance salespersons, and advisors operating under the “suitability standard” are merely required to ensure an investment is suitable for a client at the time of the investment.  Suitability means that the advice must be “suitable,” but not necessarily in the best interest of the client. Those working under the suitability standard are typically paid on transactions, often by specific fund companies to sell their funds.  Sometimes these funds cost you more.  In fact, Obama’s team estimates the cost is up to 1% of your investment, or $17 billion in the U.S.

This contrasts with the “fiduciary standard” where registered investment advisorsii must always act in the client’s best interest and must disclose conflicts of interest. These advisors are typically paid not by the fund companies they recommend, but by their clients.  The difference can be very real.  The Motley Fool estimates that if, at age 45, you roll over your 401(k) into an IRA with an advisor who gives conflicted advice, you might, on average, have 17% fewer savings by age 65.

3. Fee Structure – Understand how the advisor is compensated and how you are charged.

Common pricing structures in the industry include: 1) Commission based,   2) percentage of assets managed, 3) retainer, and 4) a hybrid that has a retainer plus a percentage of assets.  If it’s a commission based system, investment firms, mutual funds and others pay the advisor to sell their products.  You also need to ask what you will be charged on trades and costs of funds.  With percentage based and/or retainer fees, you pay the advisor directly.  This advisor should be working only on your behalf.

 4. Credentials – It’s alphabet soup out there.  It is important to understand a potential financial advisor’s credentials and if they are current.   Financial planners who have achieved the CFP® certification must meet initial educational requirements, pass an exam, gain direct experience, and maintain ongoing educational requirements.  These professionals also must pass ethics training and follow a fiduciary standard.

5. Approach – ask how the advisor or firm works with clients.  For example, how often do they meet with clients?  What is their investment philosophy?  How do they learn about my personal situation? What will I be expected to do to make it a productive relationship?  Who will you work with at the firm?

Now that we are less than a month from a new year, it may be a good time to start evaluating potential financial advisors.  In addition to the tips above, ask your friends and colleagues for referrals, and interview several candidates.  It may seem like a lot of leg work, but I would argue that it’s worth it to find a competent and trustworthy partner to help you reach your goals.

For help with your specific financial planning needs, schedule a meeting by clicking below, contact Joni Lindquist –, or call (913) 345-1881.

Photo credit: flazingo_photos / / CC BY-SA