Am I Ready to Hire a Financial Planner?
what does a financial planner do? Well, it depends and it depends on their certifications and what you're looking for. But a great one is someone that's helping you get your financial house in order, they're helping you protect your money, grow your money, build your money, probably putting systems in place to protect you from yourself. So that if things are happening, like for example, if you're investing in the stock market is going down, you might start to panic and you naturally would have sold a bunch of your investments and perhaps locked in your losses and that wasn't a good time to sell. They're probably going to get on the phone with you and say, hey, we've got a plan, There's a strategy in place. We put this investment plan in place knowing that these kind of things would happen. This is not a good time to sell. They can kind of talk you back down. There are also people that can help make sure that you have everything that you need for your overall financial life, not necessa...
rily just linked to getting the most bang for your buck, but also things like a state planning, how to be thinking about the future in that regard. Getting the best investment products, perhaps making sure you have the proper insurance is in place. And that's also going to get into, how to make sure you're finding the right person because all those different types of opportunities definitely means that you can be working with somebody who's getting a kickback and they're not getting you the best possible product. So we're certainly going to dig into that today. But the baseline thing to know is a financial planner is an objective third party person who is well educated if you're picking the right one in finances, so they're able to help you keep your financial house in order and protect you from yourself. In some cases now, a lot of people think you either need to look like that or that your financial planner is going to look like that and that is not necessarily true. You actually might be more ready than you think to hire a financial planner because it's no longer true that you need to be in quote the double comma club meaning you have a net worth of at least a million dollars to get access to one of these guys, a financial planner and they don't all look like that either. That's an important thing to know. But I think we often, when we conjure them up in our minds, I think that that's either someone who uses them or that's what they all look like. I'm also going to blame movies like Wall Street for that reputation as well. So times that it might be right for you to reach out to a financial planner and have one in your life include big life steps like getting married, buying a home, starting a family, inheriting wealth is definitely a big one where it might be helpful to have somebody in your corner as well as getting divorced. What you need to always remember is you want to partner with someone who is a fiduciary, that is the word you want to remember. What does that mean? A fiduciary, who is somebody who is legally obligated to recommend to you the best possible financial products for you and your situation. That should be any financial planners job. But legally they don't have to do that. They have to legally only adhere to the suitability rule which basically recommends that they are doing something that is suitable for you, but it's not going to harm you that they do this, but it might not be the best possible thing for you. Now there's a lot of shades of gray in there because that means they could be recommending or even selling you financial products that they get a kickback on. And they're also obviously encouraged by perhaps employers or institutions to sell those to you and they get a commission on it. But it's not actually the thing that's best for you, but it's not gonna hurt you. So legally they can get away with it, which is why I want you to always remember fiduciary and you only ever want to work with a fiduciary and how do financial planners get paid. There are a few different ways. one, it could be based on commission. Probably someone you don't want to work with. If the only way they make money is commission. That should definitely be a big red flag for you because if that's the base way they get paid, then they're going to be incentivized to be putting things into your overall plan in portfolio. They get them the most commission going back to the suitability idea is probably not the best thing for you. It's just okay. Another one is fee only, so this keeps it a nice clean relationship, you just pay them a fee every single, perhaps month, quarter year, whatever the structure is and they help advise and guide you, but they don't get any commission off of anything they put into your portfolio and then there's fee and commission, sometimes this is called the based, it's a hybrid of the two, they probably will take a fee from you and in addition, they legally can also sell you or put financial products into your overall portfolio that they get a commission on. So this is the three different ways that planners usually get paid another one. You're going to hear about a lot. Just generally if you have a researching financial planners is this idea of a um or assets under management, which means they get a percentage of your portfolio as payment. That's really where you have this idea, you know, that cliche stereotype of needing at least $1 million dollar net worth in order to talk to a financial planner, get access to one because of course, if you are getting paid in assets under management, then you want the most amount of assets possible that you're managing. So you get more money and it's more worth your time. That's really where that idea comes from. Certainly a ton of financial planners and advisors who still work with that method, but you also are seeing a lot more now that our fee only and that does cater more towards younger gen x millennials then of course, future gen z folks who maybe aren't in that sort of double common net worth land, at least not yet. And again, this fee only does really simplify your relationship with your financial advisor. I think it promotes this inherent amount of trust that you can have in them because you know, they're really never trying to sell you anything that is nefarious or just getting them the absolute most bang for their buck with very little regard to you. So see FPs are people who have to go through a very rigorous training program in order to and then pass a test and have a certain amount of experience in order to maintain the CF P license, they also are required to be a fiduciary. So that really does help simplify your situation and when you're looking for one, I encourage you to check for a see FP designation. You don't have to, there are some great planners who are not see FPs, but if you want the best of the best I would go there, you can check the validity of their title by going to the C. F. P. Board website. There's information about making sure that they are actually properly accredited that they're all up to date. There's nothing outstanding. If there's any sort of black marks on their record it's going to be recorded there. You can have your advisor sign a fiduciary oath. You can actually just look up that term and you can google and download this fiduciary or if you can take into them again if the RCMP they should already be a fiduciary but you can have them sign a fresh oath just for you at the beginning of your relationship if you want. And like I just said they need to be an expert in your particular area of need. Now one thing to know as because of client privilege type things in this industry, they usually can't refer you to somebody else to be an endorsement because they are kind of protecting their clients in that regard. So you're just gonna need to straight up ask them have you had experience with anybody who has student loans. Is this something that you know a lot about? Generally they are going to be forthright with you because if they're not and they don't do a good job you're going to fire them and move on to someone else and they usually are very connected to each other. So they hopefully can refer you to somebody else who can help if that's part of the situation and I'd love for you being with somebody that's the only, again, if they are fee based, I'm not saying immediately write them off but have a conversation about what that means. Now, if you're not ready for a full time planner, there are certainly other options for you. Usually you want to think about a financial planner as being somebody with whom you're in an ongoing relationship, you're probably checking in once a quarter, if not at least once a year checking to make sure how your financial health is growing, what you're doing, investment planning, retirement planning, all of that. They are helping with all of these different parts of your life, but if you're not ready for that, you might be able to find someone who does offer one off meetings, just general consultation. Usually it's going to be a fee. Some of them do it via Skype, so you don't even have to physically be in their office, You don't even have to physically be in their state. Although I will say it's very helpful if it's somebody who knows the ins and outs of options in your specific state. I do highly encourage you do that and they generally just do charge a one time off fee. Not all financial planners do that. In fact, I would say that most of them don't, but there are some out here who do some also have created courses or resources that they sell on their sites for situations such as these where you think I need some help I can't afford I'm not currently interested in ongoing relationship. So so what can I do here are some red flags to look out for when you are vetting a financial planner again, commission only for sure. Big red flag. If they're just fee based, it needs to be a conversation. Why when are you putting commission based products in? Can you tell me what they are and how can I make sure that that is the best possible product for me? They won't sign a fiduciary oath, especially if they claim to be and we don't like them. We're moving on. If they offer primarily free services, this is a huge red flag because they're getting paid somewhere. So the question is if all of their services that they're offering to you are free, how are they making their money? It's probably because they're selling you a product at some point or they're only giving you things that are commission based and they're getting a big kick back and they're not actually letting you know. So please make sure you understand how somebody makes their money when it comes to things like this. And then if they claim to be a C. F. P. But they're not registered on the website or they appear to not be in good standing. Obviously a big red flag. And if they've never worked with someone in your particular situation this by no means means that they're a bad financial planner, but it just means that they're probably not the perfect fit for you. So where can you actually find one of these guys? There are a bunch of different advisor networks that exist. I did mention X, Y. P. And a little bit earlier when we were talking about places to look. That's also a great it's kind of a search engine. If you will of ways to search out different planners. They all our Cf P. S. They are the only, I do believe, and a lot of them are millennials and their catering specifically to the millennial demographic. So that's incredibly helpful. Garrett planning is another option for you to look into. And then the National Association of Personal Financial Advisors, it's just a huge list of a bunch of different people. I do not believe that they are all fee based. I think some of them actually are asset under management, Just something for you to know. But different resources places that you can look people up