If you have made your way to this blog, you have likely already asked yourself the age-old question: is a financial planner worth it? Hiring an advisor to help manage your finances can be a big decision and one that you should weigh the benefits against the costs. Unfortunately, the most difficult part of the process is oftentimes navigating the overwhelming deluge of financial firms, services, and models. Morris Financial Concepts is here to help guide you through every step of the process so that you can rest assured knowing that you have found the right financial planner for you!
Everything You Need To Know Before Hiring a Financial Planner
Do I Really Need a Financial Planner?
A financial planner is a professional that can offer a variety of financial services including:
- Tax Planning
- 401k Planning
- Estate and Legacy Planning
- Retirement Planning
- Education Funding
- Charitable Giving
- Investment Portfolio Management
A trusted financial planner can be an important partner in achieving one’s short and long-term life goals. Hiring a financial planner can be beneficial to anyone, even those who don’t necessarily have specific or pressing needs. Unfortunately, many individuals who would greatly benefit from working with a financial planner do not seek professional advice or mistakenly believe they don’t need it. Properly managing your finances and making savvy decisions takes significant amounts of time, effort, and expertise. And it isn’t a one-and-done task either – it takes consistency and persistence.
Simply put, time is money; there is almost always a cost. Maybe it is an opportunity cost, like holding on to cash rather than investing in a profitable venture, or a loss that comes from a poor financial decision that you prolonged. Regardless, many individuals do not have the extra time to research financial information from credible sources, evaluate their options, and make the best decision. If your finances need more attention than you can provide, it is likely worth hiring a financial advisor whose sole job is to help you tend to them. As we have learned over the past year, life can happen fast and it can be difficult to predict what fluctuations might be on the horizon.
Which Financial Planner Is Right For Me?
There are many synonyms for financial planners: financial advisor, investment advisor, wealth manager, and the list goes on. Regardless of the title, not all of these financial professionals are held to the same standard. With this in mind, it is important to do your own research. Set titles aside momentarily, focusing instead on other aspects such as fee structure, education and credentials, standard of care, personality fit, and the firm itself.
1 – Compensation Structure
Financial planners generally fall into one of three categories: fee-only, fee-based, and commission-based. As the name suggests, the latter is paid by selling financial products or making transactions on the client’s behalf. Similarly, fee-based planners are compensated by both commissions from product sales and fees paid directly from the client. Commission and fee-based advisors are typically encouraged (some even required) to sell products that are hopefully suitable. Unless they abide by the fiduciary standard, though, these products may not be in the absolute client’s best interest.
Suitable products follow the legal obligations for financial planners operating under a commission-based system. The technical standard is known as the “suitability rule,” which means that a financial advisor under this fee structure may sell their client any products that could be deemed suitable for someone in their situation. In this way, financial recommendations are generalized rather than personalized. Furthermore, commission and fee-based financial planners are often not obliged to disclose any conflicts of interest. This leads to questions about the duties and motivations involved with commission-based financial firms, as their incentives may be more aligned with the products they sell than with the best interests of their clients.
The fiduciary standard is one that requires the advisor to act in the absolute best interest of the clients. It is another way of saying, “how would I do this if these were my resources?” Advisors who abide by the fiduciary standard should disclose any conflicts of interest that may arise with the implementation of the advice. Fee-only financial planners operate under this standard, charging a flat fee to perform specific financial services. Fee-only financial planners may work on retainer agreements, hourly, or using a formula based on the assets that they are tasked to manage.
2 – Credentials
There are no formal education requirements for individuals that offer financial advisory and planning services, therefore, additional designations are insightful. Just as with financial titles, there is no shortage of possible credentials. First and foremost, we recommend working with a fiduciary advisor who is certified by the Certified Financial Planner Board of Standards, Inc. (CFP Board).
Fee-only CERTIFIED FINANCIAL PLANNER™ (CFP®) professionals have met the rigorous training and experience requirements set by the CFP Board, have passed the certification exam, and are held to the highest ethical standards. The CERTIFIED FINANCIAL PLANNER™ professional designation is typically considered the ‘gold standard’ for financial planners in the profession. The Chartered Financial Analyst® designation is likewise the ‘gold standard’ for investment analysis and overall asset management. Like fee-only planners, CERTIFIED FINANCIAL PLANNER™ professionals are required to uphold the fiduciary responsibility for their clients.
Is a Fee-Only Financial Planner Worth It?
The actual cost of working with a financial advisor depends on several factors, including your present financial situations and your overall goals. Though the cost of a financial planner is an important factor to consider, it shouldn’t be the only factor in your decision. Remember, the least expensive option today could end up costing you significantly more in the long run. The advisory fees you may have to invest upfront can be offset by the financial benefits you reap down the road.
While other types of financial advisors may be held to a fiduciary standard at certain times in the relationship (though oftentimes not at all), only a fee-only financial planner serves as a full-time fiduciary. Licensed and registered fiduciaries operate under the law’s highest standard of care and are exclusively obligated to put their clients’ interests first and foremost. The loyalty is undivided, and the law is clear – you are the only priority.
There are plenty of resources you can use to find qualified fee-only planners. The National Association for Professional Financial Advisors screens members thoroughly before they are allowed to join. All members must be exclusively fee-only, meaning that your advisor is duty-bound and incentivized to work for you, and you alone. Things like a NAPFA membership referral could help keep you from wasting money on needless products and excessive services in the future.
Where Can I Find a Fee-Only Financial Planner Near Me?
The financial industry is increasingly shifting towards the fee-only model, yet at Morris Financial Concepts, we have always operated with a client-focused approach. We believe everyone should gain knowledge and have access to competent, objective advice regarding their financial resources. With specialties in wealth management, retirement planning, 401k, education funding, legacy planning, and charitable giving, we are passionate about helping our clients around the world achieve their goals. Don’t wait to start building a financial partnership that you can confidently trust to put your needs first.
Contact us today to connect with our personalized team of fee-only CERTIFIED FINANCIAL PLANNER™ professionals, Chartered Financial Analysts (CFA®), tax professionals, administrators, and operations professionals.
The opinions expressed herein are those of Morris Financial Concepts, Inc. (“MFC”) and are subject to change without notice. This material is for informational purposes only and should not be considered investment advice. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future results. MFC relies on information from various sources believed to be reliable, including third parties, but cannot guarantee the accuracy and completeness of any third-party information. MFC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about MFC including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request. The Chartered Financial Analyst (CFA) is a qualification for finance and investment professionals, particularly in the fields of investment management and financial analysis of securities. The designation is an international professional certification offered by the CFA Institute to financial analysts who complete a series of examinations. The CFA designation is awarded to candidates who must pass each of three six-hour exams, possess a bachelor’s degree from an accredited institution, and have four years of qualified professional work experience. CFA charter holders are also obligated to adhere to a strict Code of Ethics and Standards governing their professional conduct. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute. Please refer to www.cfainstitute.org for further information. Certified Financial PlannersTM (CFP®) are licensed by the CFP® Board to use the CFP® mark. CFP® certification requirements include: Bachelor’s degree from an accredited college or university, completion of the financial planning education requirements set by the CFP® Board (www.cfp.net), successful completion of the CFP® Certification Exam, comprised of two three-hour sessions, experience requirement: 6,000 hours of professional experience related to the financial planning process, or 4,000 hours of Apprenticeship experience that meets additional requirements, successfully pass the Candidate Fitness Standards and background check, agree annually to be bound by CFP® Board’s Standards of Professional Conduct, and complete 30 hours of continuing education every two years, including two hours on the Code of Ethics and Standards of Professional Conduct. [MS1] MFC-21-02.