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Retirement Planning Programs - Getting Help: Hiring Professional Advisors

financial planners information certified

Some people seek professional assistance with retirement planning, often because they lack the time or expertise to do investment research, or because they are faced with an immediate decision, such as handling a lump-sum pension distribution or evaluating an early retirement buyout offer. There are many types of financial advisors, including bankers, accountants, insurance agents, employee benefit counselors, and stock brokers. In addition, over 250,000 professionals call themselves financial planners. Many have earned the certified financial planner (CFP) or chartered financial consultant (ChFC) credential or are certified public accountants with a personal financial specialist (CPA/PFS) designation. To select a financial professional, consider the ‘‘three Cs’’: credentials, competence, and cost.

Credentials. Certified financial planners are licensed by the Certified Financial Planner Board of Standards (CFP Board) to use the CFP marks upon successful completion of a ten-hour examination, three years of financial planning experience, and a biennial continuing education requirement. The names of local CFPs can be obtained at the CFP Board’s website, www.cfpboard.org.

Chartered financial consultants receive the ChFC designation from The American College, located in Bryn Mawr, Pennsylvania. ChFCs must also have three years of professional experience, pass exams, and complete continuing education courses. Information is available on the Society of Financial Service Professionals’ website, www.financialpro.org.

CPA/PFS designees are certified public accountants who have passed a financial planning exam and a rigorous tax exam, and who have met continuing education requirements. Additional information is available on the website at www.cpapfs.org.

Competence. Financial advisors with more than $25 million of assets under management are required to register with the U.S. Securities and Exchange Commission, while smaller firms must register with state securities regulators. Investors can call the North American Securities Administrators Association (NASAA) at 1-888-84-NASAA, or their state securities agency, to obtain information about specific financial professionals. These agencies can access the Central Registration Depository (CRD), which contains licensing and disciplinary information about financial advisors nationwide.

Cost. Financial planners are generally compensated in one of four ways: through salary, fees, commissions, or a combination of fees and commissions. Fee-only planners are compensated entirely by their clients. The fee can be an hourly rate, a fee per plan, or a percentage of assets under management. Commission-only planners receive commissions from the sale of products such as mutual funds. Some advisors charge both fees and commissions or use commission income to offset all or part of the fees charged for financial advice.

Those wanting to hire a financial advisor should follow this six step process:

  1. Obtain referrals from other people or professional organizations
  2. Call several planners for information about their services
  3. Check planners’ references and CRD registration information
  4. Interview several planners and ask questions such as: What services do you provide? How are you compensated? What is your investment philosophy? How often will my financial plan be reviewed? May I see a sample financial plan?
  5. Assess your comfort level with each financial planner
  6. Hire a financial planner upon receipt of a written agreement
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