Choosing a Financial Planner: Everything You Need to Consider

There was a time when hiring a financial advisor was only considered necessary for exceptionally wealthy individuals who were unsure how to make their money work for them. This has steadily changed over the years, and more and more people are hiring planners to help them with budgeting, investing, saving, and retiring.

If it's something that's been on your mind recently, you might be feeling unsure about where to begin. We understand that paying someone to give you financial guidance can seem a little unnerving. Therefore, we've crafted this guide to help you determine if you need an advisor and how to choose the right person for you.

Should I Consider Working With a Financial Planner?

You might be wondering whether you genuinely need a financial planner or not. In truth, not everyone requires their services, yet they can be undeniably helpful to others.

Here are a few examples of situations in which it may be worth your while to consult a professional:

You've recently come into a large sum of money.

You're eager to start investing but don't know where to start.

You're planning for your retirement.

You need help clearing debt.

You're hoping to buy a house or make another sizable purchase.

You want to learn how to budget appropriately.

You're looking for financial advice about significant life changes, such as going through a divorce or changing career paths.

You don't have the time to take care of your finances by yourself.

Questions to Ask Yourself Before Hiring an Advisor

Regardless of your reasoning for seeking the expertise of a financial planner, ask yourself these questions before making a final decision.

Do I Really Need a Financial Planner?

This isn't the most straightforward question to answer, as it's not always clear whether you can handle your finances yourself or if having a helping hand will go a long way. There's no short answer, but if you're feeling totally overwhelmed when you try to get your head around taxes, budgeting, or investing, you might benefit from working with an expert.

Fortunately, many advisors offer consultations before you make any substantial commitments. During these sessions, which are sometimes free of charge, you'll get a better idea of how they can help you, their prices, and if their specialties are relevant to you.

How Much Should I Be Expecting to Pay for Their Services?

Prices can vary between financial planners. Some charge distinct fees based on hourly, monthly, or hourly rates. However, most tend to charge a set percentage of the amount of money they're helping you manage. This may be as little as 0.5% or as much as 2%, but it will depend largely on the type of advice they're giving you.

For example, individuals seeking an advisor for investment purposes may need to pay by commission. If an investment makes a return over a certain amount, the advisor can charge a fee of 10-20%.

What Credentials or Certifications Should I Be Looking For?

It might seem like a no-brainer, but unless you're up to speed with the ins and outs of the finance world, you might not know which qualifications a planner should have. This is something worth spending time researching, as the certifications required look different in every country.

In the United States, look out for the following:

Certified Financial Planner (CFP)

Chartered Financial Analyst (CFA) 

Personal Financial Specialist (PFS)

Financial Risk Manager (FRM) 

Certified Investment Management Analyst (CIMA) 

Remember, this isn't an exhaustive list, but it may be helpful to know what kind of credentials to be on alert for.

What Are the Specific Services They Offer?

Most financial consultants have specific areas of expertise. While some can take care of various aspects of your finances, it's generally better to choose someone who's particularly knowledgeable in the area that concerns you.

This can also help you narrow down your options. The sheer volume of financial planners out there can sometimes make the hiring process more overwhelming than it needs to be, so having more precise criteria can be beneficial for several reasons.

Do They Have Any Reviews or Testimonies?

Don't underestimate the importance of taking some time to read through reviews and testimonies! We all put our best foot forward online, and financial advisors are no different. 

You shouldn't feel under pressure to jump the gun and hire someone without properly vetting them and checking their ratings. Even if a trustworthy friend or family member has recommended someone to you, it's always worth doing your own research, too.

What Are Your Financial Needs?

Do you know exactly what you're looking for in a financial planner? Until you know what kind of assistance or advice you need, hiring someone off the bat may not be a good idea! Be clear about what you're hoping to achieve with the help of an expert rather than simply hiring someone because you feel that you should.

However, you might find it useful to have a handful of consultations with different advisors, as it may make refining your specific needs easier.

How Do They Communicate?

In the past, a conversation with a financial planner was more of a sit-down affair than it is today. That's not to say that face-to-face meetings are no longer popular, but you might find that some operate via video chats, phone calls, emails, and even text messages, where appropriate.

When you're making inquiries with potential planners, you also may want to ask about how often you can expect to get in touch for check-ins and follow-ups. These can seem like minor details, but they turn into deal-breakers if you and your advisor aren't on the same page.

All the Must-Know Details About Hiring a Financial Planner

Financial planners can provide invaluable guidance, showing you how to make your money go further. Still, deciding to work with someone on your money matters isn't something you should take lightly, as finding someone who's a good fit for your needs can take time and effort.