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What Are The Five Questions To Ask A Financial Planner |
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Personal Finance -
Finance Planning
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In order to help in building your finances, you are planning
to hire a financial planner, then be sure to run the following 5 questions by
them to make sure that they are the correct planner for you:
- Prior
to starting to work together, I'd like to check you out; can you present
me with references?" "On your
record, am I going to find anything disturbing?" Okay, so that's two questions, but
they're both important. Of course,
it's possible that the planner will provide you the name of his three best
friends.
But it's also probable that those three friends, when called,
won't give you the pat answers your planner anticipated. As for a background check, ask what
organizations a planner is regulated by and call them to ensure there's
nothing in his or her disciplinary history that you find disturbing.
- "Regarding
your investment philosophy, tell me something." While it's true that a planner should
take his cues concerning the amount of appropriate risk from you, it's
also true that most have their own ideas in relation to what does and
doesn't make up "a lot" of risk.
In your questioning here, You'll need to get very specific. Ask if there are certain stocks or funds
that the planner considers should be a part of every portfolio. Ask about
what asset allocation (the ratio of stocks to bonds to cash) the planner
thinks is suitable for you.
You're
trying to ensure that you and the planner have the similar ideas in
mind. Be careful of a planner who
seems to be trying to make your life too easy by fundamentally taking you
out of the loop. Regardless of how
much you trust your planner, you should want to see all account statements
and to sign everything related to your money.
- "For
doing this job, what qualifies you?" In this answer, you're in search of a
combination of factors. First,
significant experience (I know planners have to cut their teeth on
someone, but I wouldn't work with a planner who had been at it for less
than five years).
Second, an explanation
of their specialty. Planners who were stockbrokers first may lay emphasis
on your portfolio over your life insurance; those who are CPAs may focus
on your taxes, with stock picking or insurance planning coming
second. Provided that their strengths
coincide with your focus, both of those things are fine.
- Regarding
your current clients, tell me." The
best reply is that the planner works with someone who sounds a lot like
you, in profession, in income level, in family status. You just don't want to be the test case.
That's not to say most planners couldn't study enough to manage a situation
they haven't seen before.
- "By
what means, do you get paid?" Most
compensation methods are good enough, on condition that the planner's
willing to tell you about it in writing prior to you start doing
business.
You also want an estimate
of what the planner believes doing the work for you will cost (ask that it
be broken down into start-up costs and ongoing costs so that you'll know
what the relationship will cost you over, say, a year).
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