A smart and responsible financial planner is a critical team member who can help your parents plan and pay for their retirement. Helping them find that person is one of the most important ways to make sure their financial situation is under control.
But finding a savvy financial planner who can help them avoid costly mistakes while making sure there will be enough money to pay for later care and lifestyle priorities isn't easy. Start by checking with trusted friends and family to see if anyone works with a financial planner worth raving about. Once you have a list of names, it's time to start the interview process.
Here's what you should find out when choosing a financial planner for your parents:
Whom will your parents actually deal with?
Make sure that the financial planner you meet at the initial consultation is actually the person who'll be handling your parents' account. If this isn't the case, insist on meeting and reviewing the qualifications of the associate who'll be handling the day-to-day tasks.
What relevant experience does the financial planner have?
Financial planners come from all sorts of different financial career paths. They can be certified public accountants, stockbrokers, mortgage brokers, and insurance salespeople, to name a few options. It's important to know what your advisor's background is -- along with her professional accreditation and experience as a financial advisor -- to gauge how accurate her advice may be.
It's also important to choose a financial planner who has at least several years of experience in that role and has worked through recessions and bull markets and can advise clients through both market conditions.
Finally, it's crucial to make sure she doesn't have any disciplinary actions in her record. An easy way to do this is to check with the Certified Financial Planners Board of Standards hotline (888-237-6275). If she's selling stocks or securities, you can also check her disciplinary record with the National Association of Securities Dealers (800-289-9999.)
Does the financial planner really listen to you and your parents?
For anyone, but especially for people facing retirement and an uncertain financial future, laying out the details of their financial existence to a relative stranger can be daunting. Although your parents should keep the specific details of their finances to themselves during the interview process, when they do choose a financial planner to work with, they'll need to feel comfortable opening up. Many of the long-term financial planning issues they face are uncomfortable for most people to think about, much less discuss with a stranger -- long-term care, nursing home costs, and even end-of-life care and expenses. Many older adults also may not be familiar with current financial strategies or products, and for that reason may find the whole experience intimidating.
But a good financial planner who's experienced with elder issues can provide invaluable advice about everything from asset management to housing decisions, estate planning, and what kind of long-term care your parents can afford, among many other issues.
For the relationship to succeed, though, your parents will have to open up and provide a complete picture of their financial situation, including assets, debts, and current expenses, as well as lifestyle expectations for the next 10 or 20 years. This can be a difficult process, especially for those who are protective of their privacy and independence. But if the financial planner you choose is empathetic, attentive, and sensitive to your parents' needs, it can help make the process of addressing their financial future much less intimidating.
More Questions for a Financial Planner
What other financial products does the financial planner sell?
To get completely independent advice, you need to make sure that your advisor is completely independent, or at least completely transparent. Find out what incentives -- if any -- the advisor receives from selling you insurance or securities. It's not impossible for a nonindependent financial advisor to give you stellar advice, but such an advisor comes with a lot of baggage. If you know that your financial planner gets a 5 percent commission on sales of life insurance, for example, you may be less likely to bite when she gives you the hard sell on term policies.
How will your parents pay for these services?
It's important to know up front how the financial planner you're considering earns her salary. Some are paid on commission -- usually a percentage of the amount the client invests -- deducted monthly or quarterly from the account. Others charge an hourly fee or flat rate, while some receive a salary from their company, which in turn collects commissions from products you buy. Still others make their money from some combination of fees and commissions. So-called fee-only financial advisors, or those who don't charge commissions or make money from product sales, are often the safest bet in terms of avoiding conflicts of interest and receiving objective advice.
Has the financial planner been certified by a reputable source?
Make sure a reputable source has accredited the financial planner you're considering. There are more than 54,500 certified financial planners in the United States, according to the Certified Financial Planner Board of Standards, and with so many to choose from you'll find a huge range in quality among the advisors in your area.
Accreditations don't guarantee a successful relationship, but they do give you an indication as to whether your financial planner has stayed abreast of developments in the financial planning world. It can be difficult to keep all the acronyms and abbreviations straight, but if you see letters after the name of the planner you're interviewing, find out what they mean and how many hours of continuing education she needed to get them. (The easiest way to do that is to enter the acronym in a search engine, like Google or Yahoo.) For example, to qualify as a NAPFA (National Association of Personal Finance) registered financial advisor, your planner must complete 60 hours of continuing education every two years, while the Financial Planning Association doesn't require any continuing education at all.
Most financial advisor associations offer an elder care certification, such as certified senior advisor, for individuals who've completed special training dealing with the specific financial issues and concerns of senior citizens, so find out if the planner you're considering has such an affiliation.
Can you parents talk to previous clients?
Any financial planner you're considering should happily offer a list of referrals, including several long-term clients. The latter are especially important to talk to because they can give you a sense of how your advisor performs under different market conditions. A referral list consisting only of new clients is a red flag "” if a financial planner is involved in any kind of unethical conduct, she would be unlikely to make long-term clients available to talk to potential customers. Of course, probably the best way to find a financial planner is a referral from someone you know and trust who's been using her planner for several years and is happy with the results.