How to Find a Good Financial Planner or Financial Advisor
Question 4: How many meetings will this take?
Again, it is time to sit back and listen. Doing an actual full financial plan will take a couple of meetings. The one you are sitting in, another one where you bring all the paperwork you didn't bring to this meeting, a meeting to present your plan, and a meeting to implement your plan (actually fill out paperwork.) Some of these meetings can be combined. Again, see how it feels. Does it feel like it moves too fast or too slow. If you suggest more or less meetings how do they react? Are they willing to work with you?
Question 5: What kind of Qualifications and Certifications do you have?
What you want here is a dead on match with what you found on the NASD website. Keep in mind only the Series XX exams are on that website. Things like Certified Financial Planner or CFP or Certified Retirement Planner will be documented elsewhere.
Write down every certification he mentions. Write down both the name and the abbreviation. So, write down Certified Financial Planner (CFP) and so on. We'll talk about these later, and we'll verify that they are telling the truth.
Note carefully anytime they say "in progress" or "working on." This is kind of a cheesy way to drop the right words and phrases into the conversation without directly lying. The hope is that you will remember them without the context. So you remember that they said something about a CFP and not that you remember that they said they were "working on their CFP" which means they bought a book once.
Question 6: Do You Usually Put Your Clients in Mutual Funds or Stocks?
This is a question we'll grade after the meeting, but the key things to listen for here is whether or not you get a redirection away from these options. A fully qualified competent financial planner will undoubtedly need to use one of these two investments for at least one of your goals. If you feel like you are being prepped to use something "better" make a note. The "better" thing is usually insurance or annuities. We'll talk about them later. You may also run across other concepts including: ETFs, Index Funds, UITs (Unit Investment Trusts) and so on. Again, write down any key words (product names).
Otherwise, you are looking for an "it depends" answer. Neither mutual funds nor stocks are the perfect investment for everyone. The best financial advisor should be telling you about how they carefully analyze everyone's unique situation and then make investment decisions. If the answer you get sounds like you will be getting a "canned" package of the usual, make a note and start to view this perspective financial planner more skeptically.
Question 7: What kind of returns did you get for your clients in 2007?
This is a trick question. First, there are very specific regulations regarding the quoting of returns. Do you ever wonder why any advertisement you see for a mutual fund that says it had a 18% return comes with twenty lines of tiny disclosure text? It is because quoting returns is carefully regulated. If they just flat out give you a number, it is time to turn on your caution light. The correct answer should be that they can't tell you. Again, if you are getting a financial plan that is customized to you, then you won't be getting the same returns as the guy who comes in for the next meeting. The answer should be something about a diversified portfolio and about your risk tolerance. They may mention that some numbers in general. Most importantly the answer should contain a warning that the numbers from last year really aren't important and that this is a long term process and you want to focus on the longer term.
If you do not hear anything about long term or a caution about only looking one year worth of data you have busted this advisor. Either they are a gun slinging trader (or they think they are) or they are saying whatever they have to say to make a sale. Leave whenever it works conveniently for you. Do not leave behind any documentation and do not sign anything. Cross them off your list and move on.
Page 5 - How to Find a Good Financial Planner
