Getting started
Advice for choosing a financial planner
By Seattle Times staff and Knight Ridder Newspapers
If you decide to seek professional help in retirement planning, here are some tips for choosing a financial planner.
Retirement planning involves considerations beyond saving and investing. You need to think about health costs, taxes, life insurance, college savings for your children, elder care, estate planning and making sure savings last your lifetime.
How much of an estate will the planner have to deal with? If you don't have a reasonable net worth — anywhere from $250,000 to $1 million — many planners won't touch you.
A fee-only plan typically costs about $2,000, so if your net worth is about $25,000, for example, that would be about 8 percent of your net worth.
You might be better off at your bank or insurance company, which usually offers free advice and sell products on commission.
Check credentials
Because anyone can call himself a financial planner, carefully examine qualifications and experience. Seek recommendations from knowledgeable friends, accountants, lawyers and others you trust.
Most financial planners are considered investment advisers. Such an adviser must register and file an ADV form with the state, which spells out education, work history and whether he or she has ever been part of a bankruptcy proceeding or convicted of a felony. Ask the planner for a copy.
The state Department of Financial Institutions (800-372-8303) can verify whether a planner is registered, tell you how long he's been licensed (licensing means the person has passed certain qualifying exams and is subject to audit), and also report any complaints. It also can give you a copy of the planner's ADV form; there may be a nominal charge.
Experience counts
Choose a planner with at least five years' experience — some recommend seven to eight years.
Ask questions
Here are some important ones to ask advisers you interview:
How are you compensated? Options include charging clients by the hour or job, managing portfolios for a yearly fee, and earning commissions on selling financial products.
How many hours do you spend with the average client? What is accomplished in that time? Ask this of someone who charges by the hour.
What is your commission? Ask this if the adviser receives commissions for selling financial products.
What follow-up attention will I get, and will I have to pay for it separately? The adviser should detail compensation and services in a contract or letter of agreement.
Can I have the names of clients in similar circumstances to mine? Then call and ask them: "Did this planner help improve your financial situation and if so, how? Would you hire this person again?"
Back to top