Austin, San Antonio and Central Texas Five Star award winner

How to Pick a Financial Planner

Candidates aren't hard to come by. Here's how to find the right one for you.
By the editors of Kiplinger's Personal Finance, Updated January 2015

It's not always easy to take a dispassionate view of your own financial situation and decide on the proper mix of insurance, investments and the like. A good stockbroker can help. But if you'd like someone to make broader-based investment recommendations based on extensive knowledge of your financial situation, you may be in the market for a financial planner.

You can get names of planners in your area from the profession's major membership organizations:

  • For a directory of fee-only practitioners, contact the National Association of Personal Financial Advisors.
  • Find CPAs who have earned the credential of Personal Financial Specialist (PFS) through the American Institute of CPAs.
  • The Financial Planning Association has a registry service you can use to get names of members in your area. Visit its Web site, where you can do an online search. The site also features consumer information related to financial planning.

 

After you have the names, select at least three candidates. Visit the office of each and ask for a detailed statement of fees and services, a résumé and references. Your purpose is to compare them on the following points:

Experience: Your planner should have, at the very minimum, a few years of experience in planning or allied fields, such as accounting, securities analysis or trading, or law.

Credentials: CERTIFIED FINANCIAL PLANNER™ (CFP®) is probably the best-known credential. Graduates must take a series of courses, pass a two-day, ten-part exam, and complete three years of work experience to earn the CFP designation. In addition, the planner must complete 30 hours of continuing education every two years to keep the credential. The coursework usually takes a couple of years or more to complete and covers virtually all aspects of financial planning for individuals.

Chartered Financial Consultants® (ChFC®) have earned the designation from the American College in Bryn Mawr, Pa., which also grants an insurance-business certification, Chartered Life Underwriter. The ChFC® designation is earned by successfully completing an eight-course sequence over a period of two to four years and passed two-hour exams on each.

Master of Sciences in Financial Services (MSFS) is also conferred by the American College, after 36 credits of coursework. Twelve of the credits are earned by attending two weeks of study at the college.

Registered Financial Consultants (RFC®) have met the requirements of the International Association of Registered Financial Consultants, which confers the designation on planners who meet certain academic and work-experience guidelines.

These titles do provide some assurance that the planner took the trouble to take the courses to raise his or her level of skill and knowledge in the field.

Access to experts: No one person, however well trained, has the encyclopedic knowledge required to deal in depth with all the problems that can affect an individual's financial affairs. Instead, a planner should be able to demonstrate that he or she consults regularly with experts in a variety of fields.

Fees and commissions: There is no standard fee system or scale in the planning business. Some planners work only for fees, much like lawyers. Others operate entirely or almost entirely on commissions. In between are the larger number, who depend on a combination of fees and commissions. In some cases the planner might partly credit commissions against the fee to encourage the client to buy insurance or other financial products through the planner's
company. A planner who feels confident of being able to sell a high-commission product might gamble on a low fee.

Unless you're dealing with a fee-only firm, you can expect to get suggestions that you purchase an investment or insurance product that the planner sells. There's nothing wrong with that, provided the product is suitable for someone in your financial situation and compares favorably with the scores of others you might buy elsewhere.

However, you'd want to think twice about buying a load mutual fund when there are so many no-load funds available, for instance. And why buy the stocks recommended by the planner at a standard commission rate when you can use a discount broker? It's up to you to decide whether the quality of the planner's service is worth the cost.

 

The Five Star Wealth Manager award, administered by Crescendo Business Services, LLC (dba Five Star Professional), is based on 10 objective criteria. Eligibility criteria – required: 1. Credentialed as a registered investment adviser or a registered investment adviser representative; 2. Actively licensed as a registered investment adviser or as a principal of a registered investment adviser firm for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by Five Star Professional, the wealth manager has not; A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three settled or pending complaints filed against them and/or a total of five settled, pending, dismissed or denied complaints with any regulatory authority or Five Star Professional’s consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through Five Star Professional’s consumer complaint process; feedback may not be representative of any one client’s experience; C. Individually contributed to a financial settlement of a customer complaint; D. Filed for personal bankruptcy within the past 11 years; E. Been terminated from a financial services firm within the past 11 years; F. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria – considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Award does not evaluate quality of services provided to clients. Once awarded, wealth managers may purchase additional profile ad space or promotional products. The Five Star award is not indicative of the wealth manager’s future performance. Wealth managers may or may not use discretion in their practice and therefore may not manage their client’s assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. For more information on the Five Star award and the research/selection methodology, go to fivestarprofessional.com. 1,102 Austin area wealth managers were considered for the award; 161 (15 percent of candidates) were named 2018 Five Star Wealth Managers. 2017: 1,431 considered, 207 winners; 2016: 1,283 considered, 351 winners; 2015: 1,968 considered, 374 winners; 2014: 2794 considered, 357 winners; 2013: 2,254 considered, 399 winners; 2012: 1,673 considered, 392 winners.
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