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I.I.I. Offers Tips for Picking a Financial Planner

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Reaching Your Financial Goals Starts with Choosing the Right Advisor for Your Needs

INSURANCE INFORMATION INSTITUTE
Contact: Press Offices
New York: 212-346-5500; media@iii.org
Washington, D.C.: 202-833-1580

NEW YORK, May 14, 2007 - Whether you are buying a house, planning for college or laying the groundwork for retirement, the choice of a financial planner can be the first step on the road to achieving your financial goals, according to the Insurance Information Institute (I.I.I.).

However, the process of selecting the right advisor can be confusing. "Choose carefully. Your goal is to find a financial professional you can trust, who understands your goals and tolerance for risk, who has the right areas of expertise for your situation and who will create a plan tailor-made for you," said Jeanne Salvatore, senior vice president and consumer spokesperson for the I.I.I.

To make the selection process easier, the I.I.I. offers these tips for choosing a financial planner.

  • Know where to find a planner. Financial planners come in all shapes and sizes. Some have their own business, others may form part of a larger financial planning practice, and many work within other types of financial institutions, such as a commercial bank or an investment firm.
  • Find a planner you can trust. One of the best ways to get started is word of mouth. Ask for referrals from people you trust: friends, family members, your insurance agent, or your accountant. Get at least three names and schedule appointments for a consultation with each. Check that the first consultation is free of charge.
  • Ask about credentials and qualifications. The term "financial planner" is used by many financial professionals. It is important to look at education and professional designations to find a person who is truly qualified for the job. Designations include: Certified Financial Planner (CFP), Personal Financial Specialist (CPA-PFS), and Chartered Financial Consultant (ChFC). Each of these has received extensive training and has passed rigorous tests to earn their designation and they are all accredited by a recognized program. Depending on your needs, look for a planner with experience in topics such as insurance, annuities, tax planning, investments, retirement and estate planning. Whoever you chose, check his or her credentials. ( For a useful chart outlining the details of all the principal financial credentials, go to: http://www.aarp.org/money/financial_planning/sessioneight/understanding_financial_credentials.html )
  • Ask about experience. Find out how long the planner has been in practice and choose one who is seasoned, and experienced in counseling individuals on their financial needs. Remember, you are looking for someone who will be with you for the long haul.
  • Ask about compensation. An advisor usually gets paid in one, or a combination, of the following ways: an hourly fee, usually $100 to $300 per hour; a fee based on the percentage of assets managed on your behalf, typically 1 to 1.5 percent; a commission derived from the investment products sold to you; or a flat fee for all services provided. After the initial consultation, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Proceed with caution if you feel there is a possibility that the advisor might be paid more for suggesting a course of action that is not as suited for you-for example if the planner gets a commission for selling certain mutual funds and suggests only those funds, rather than a range of more suitable options. Also, check that the advisor's compensation is not out of line with what others would charge, or with the advisor's experience and level of expertise.
  • Find a planner who listens to you and "speaks your language." Communication style is important, especially when dealing with complex financial information. An advisor should welcome your questions and take the time to answer in ways you understand. Whether you prefer to have proposals and information presented in the form of graphs and charts, or you feel more comfortable with detailed written materials make sure the advisor is able to adapt.
  • Find a "team player." No one knows all the answers. Choose a planner who specializes in one or two areas (such as investments, insurance, or income taxation) and who is willing and able to work with others who specialize in other areas in which he or she has less expertise. Your advisor should know which other professionals to consult in order to produce the best outcome for you.
  • Understand what a financial planner can (and cannot) do for you. The role of a financial planner is to: help you gather, organize and analyze your financial information; work with you to clarify and prioritize realistic long- and short-term financial goals; and suggest ways in which you can structure your finances in order to meet those goals. As the client you should listen carefully to the planner's advice, but you will be making the final decisions about which financial choices are right for you and your family. You will also be responsible for committing to and abiding by the plan the planner puts together for you. Even with the best planner and most complete financial work-up in the world, if you don't stick to the plan, you will not meet your goals.

The first step in the financial planning process is to gather all your financial information in one place in order to create a complete financial picture. To help you along in this process, the I.I.I. has created free financial inventory software. This software will allow you to enter all of your relevant financial information including investments, retirement accounts such as 401(k)s or IRAs, insurance policies and other assets and liabilities. This financial inventory can play a key role in helping you and your financial advisor assess where you are financially, and to monitor your progress as you move toward your ultimate goals.

The software can be downloaded at: http://www.myfinancialhouse.org .

For more information about insurance, go to the I.I.I.'s Web site: http://www.iii.org .

If you are in radio and plan to do a story on this topic, feel free to download the associated I.I.I. audio file available at /media/radio/prfinancialadvisor/ .

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.

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