5 Questions to Keep in Mind When Choosing a Financial Planner

5 Questions to Keep in Mind When Choosing a Financial Planner
By: Kayla Belec Last Updated: November 27, 2018

Choosing a financial advisor is an important decision, and you should treat it as carefully as you would any major decision. The choice to turn to a professional to help plan life’s financial trajectory shows a wise desire for preparation and foresight. Once that initial decision is made, it’s time to consider the details: what are you looking for in a financial planner? What certifications can an advisor possess that will benefit your specific needs? How are the services charged? With the help of Kotys Wealth Professionals and the National Association of Personal Financial Advisors (NAPFA), we’ve narrowed down five lines of questions to consider when choosing a financial planner.

1. “Are you a fiduciary?”
A fiduciary is a professional trusted to manage assets while placing the client’s best interests first and foremost. Financial planning businesses that follow a fiduciary standard, such as Kotys Wealth Professionals, are required to disclose any conflict to clients before and throughout the advisory process. Registered Investment Advisors (RIAs) adhere to this standard.

While there are many people in the financial industry who claim to have their clients’ best interests at heart, they could potentially have conflicts that impact their counsel. Non-fiduciary financial professionals often push investments with higher fees and lower returns because they earn more money for the advisor. To be sure that your advisor is following a fiduciary standard, request to see the advisor’s ADV (a form filed with the Securities and Exchange Commission) or ask if they will sign a Fiduciary Oath.

2. “How do you charge for your services? Do you receive commission on financial products?”
The way your advisor is compensated can make all the difference when it comes to the recommendations they make for you. This is an example of when a fiduciary standard comes in handy; fiduciaries fully disclose about how their services are compensated. Other planners operate under a standard that requires only that their recommendations be suitable to the client’s current situation.

There are three basic ways financial advisors are compensated: through a commission-based model, through a commission and fee model, or through a Fee-Only model. Both commissioned and commission and fee advisors receive a compensation based on specific financial products they sell to their clients, making for an intrinsic conflict of interest and potential disregard of the customer’s best interests. NAPFA supports that the Fee-Only method of compensation is the most transparent and objective method. Fee-Only planners are compensated directly by their clients for advice, plan application, and for the ongoing management of assets, minimizing conflict and maximizing the customer’s benefits. Fee-Only financial advisors may be paid hourly, as a retainer, as a percentage of assets (AUM), or as a flat fee, depending upon the planner. Kotys Wealth Professionals is one of the only Fee-Only companies in the surrounding area.

3. “What license, credentials, or certifications do you have? What is the benefit of hiring a CFP®?”
While many financial professionals refer to themselves as financial advisors, true financial planners complete laborious training to earn the CFP® designation from the Certified Financial Planner Board. Working with a CFP® professional will ensure that your money is in the hands of a planner that is both ethical and competent and guarantees that investment decisions are made with your best interest in mind. In addition to being Founder, President, and Wealth Advisor for Kotys Wealth Professionals, Wes Kotys is CFP® certified.

Additionally, NAPFA-Registered Financial Advisors always put the consumer first. They take a holistic approach to planning, and the goal is to always preserve and grow the customer’s money. NAPFA-Registered Financial Advisors must meet stiff credentialing and educational requirements, meet the most rigorous continuing education requirements in the industry, submit to outside professional review to guarantee no conflicts of interest, and more. All NAPFA members have reached this standard of excellence and are CFP® certified.

4. “What services do you provide? Do you collaborate with attorneys and accountants?”
A financial planner will help you identify your short and long-term goals and map out the path that will get you there. It’s important to categorize and consider those goals; clarifying these questions upfront with your advisor can help you pinpoint the guidance you need and determine whether this advisor will help prepare you for whatever challenge or opportunity life presents.

5. “What types of clients do you work with?”
When you’re seeking financial advice, this question might not be the first on your mind. All told, it’s an important one to consider. A financial advisor’s customer base provides not only a track record of successes, but also a guideline within which to ascertain that your goals align with the advisor’s expertise. For a planner to best help you realize your dreams, you want to make sure both of you are on the same page.

No matter what your situation, seeking the guidance of a qualified financial planner who has the education, experience, knowledge, and character to direct your financial goals is a wise decision. For further information and resources, visit www.kotyswealthpro.com or contact Kotys Wealth Professionals at 877-465-9624.