How To Choose A Certified Financial Planner – Pick A CFP Like You Pick A Tattoo Artist

by Hank Coleman

I enjoy managing my own investments .  I like picking my own stocks and mutual funds, but I know that that is not the same for everyone.  And, that is okay.  Some people have such complicated financial lives and situations that some times you need help.  Lets face it, you cannot get all of your financial advice from blogs, books, and radio talk shows.  Sometimes you should seek the advice of a certified financial planner.

But, how do you pick one?  Here are some tips…

  1. Heart of a Teacher.  My favorite personal finance radio host, Dave Ramsey, says that this is an important attribute.  You cannot just give complete control of your finances to a financial planner like most sports stars do.  You should not just turn over your investments to a financial planner.  You have to know what your planner is doing with your money and why.  It is your money.  A financial planner should teach you, show you all of your options, and let you pick where you want to invest your money.
  2. Licensed.  Insurance agents and stockbrokers have to be licensed in order to sell you these financial instruments.  Ninety percent of all of the complaints that are filed against financial salesmen involve salesmen who are not licensed.  You can save yourself 90% of your headaches by checking out your CFP. You can find out if your salesperson or agent is licensed by checking their records at the Financial Industry Regulation Authority or North American Securities Administrators Association websites.  By checking your financial planner’s credentials, you can save yourself a huge headache and mitigate a majority of the risk.
  3. Certifications.  The best financial planners are certified.  Certified financial planner are identified with the initials CFP after their names much like a physician uses MD.  The term “certified financial planner” and CFP are both registered trademarks of the Certified Financial Planner Board of Standards. CFPs go through a rigorous 10-hour examination, promise to adhere to a code of ethics, and must also meet continuing education requirements to say current and certified in their chosen profession.  You can check to see if our financial planner has the CFP designation at the Certified Financial Planner Board of Standards’ website,
  4. Salesmen & Compensation.  Remember that most financial planners are salesmen to a certain degree.  Everyone has to make a living some how, and most CFPs make their money selling you a financial product, stock, insurance, etc.  You need to know how your broker, advisor, or insurance salesman is paid.  Do not hesitate to ask them.  I know that you may be uncomfortable coming out and asking, but you need to.  They expect you to ask.  It is your money.  You must be the one looking after it the most.  Some planners are paid up front through the commissions earned by selling you products that they recommend. These arrangements could lead to conflicts of interest that could steer the planner’s advice toward more lucrative products despite their needlessness for your personal situation. You want to look for a financial planner who charges an hourly or annual fee.
  5. References & Interview.  I have walked into a tattoo parlor to get a new tattoo, and the tattoo artist only had one or two small tattoos visible on his arms.  I immediately walked out of the door and found a new place to get the art work done.  A good tattoo artist should love his trade and have a lot of tattoos.  I like to see artists with entire sleeves of tattoos on his arms and even tattoos on his neck.  You should look for a CFP the same way.  Your advisor should be passionate about personal finance and investing. They should be passionate about teaching you and explaining personal finance to you. Your financial planner should be good with money.  When you interview your stockbroker before you invest with him, you should ask questions about his ability to manage his own personal finances.  Do you want to take advice from someone up to his eyeballs in debt?  That’s one reason that I have said in the past that public school teachers should not teach personal finance. Ask your friends who they recommend.  Like a good lawyer or doctor, picking a financial planner out of the phonebook might not be the best idea.

Remember, no matter what you decide, it is your money.  No one cares more about your money and your financial future and well being than you do.  Take a vested interest in what is happening with your savings and investments.  Do not just blindly turn over your money to someone you just met.

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Ken January 21, 2010 at 9:02 am

Great advice! I especially like the one about ‘heart of a teacher.’ If your planner can’t explain it in your terms, go find another one. Good post!

Mark August 8, 2010 at 8:21 am

Great article with terrific advice.

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