What follows is advice on how to pick the best financial planner. First things first: Anyone can use the title financial planner. It’s not quite like being lawyer, where state bar associations decide who gets to practice law. As a result, all sorts of accountants and insurance agents refer to themselves as financial planners.

That said, there is a subset of financial professionals who are “certified” financial planners, or C.F.P.’s. To become a C.F.P., you need to meet certain educational and experience requirements and pass a difficult exam that covers an array of financial topics. If you’re looking for a complete, wide-ranging analysis of your financial standing, a C.F.P. is the person to see.

But first you have to find one. As with any professional service, you’ll want to start by asking people whose judgment you trust for help. Ask acquaintances who have needs similar to yours, since a planner focused on the needs of young families may not be a good choice for recent retirees.

You can also search on the Web. The C.F.P. standards board maintains a database of people who have passed its test, as does the National Association of Personal Financial Advisors (Napfa) and the Garrett Planning Network.

How do you tell one planner from another? Many differentiate themselves on the basis of how they make money, so this will be one of the first things to consider. Though some financial planners earn a salary plus bonus, most make their living one of two ways. They can make money through annual, hourly or flat fees paid by you for their time and advice. Or they earn commissions from companies, like life insurers, whose products they sell. Some planners may earn money both ways.

Napfa planners make money only through customer fees, and they have an almost religious conviction that this is the best way to operate. In their view, planners who earn commissions may be tempted to act in their own best interest, not the customer’s. Fee-only planners, like the ones who are Napfa members, might charge you 1 percent of your assets each year or charge a flat $2,000 fee for a financial plan. Garrett Planning Network members, meanwhile, pledge to work by the hour if a client desires. This might cost $200 an hour.

Planners who work on commission, meanwhile, defend their way of doing business by noting that their customers may not pay any fees for their advice. Fair enough. The question is whether they are, in fact, acting in your best interest. So ask them directly whether they intend to operate as a fiduciary, the legal term for a person who must recommend the very best product for you, even if it causes them to earn less money somehow.

Napfa publishes a thorough list of additional questions you should ask financial planners before picking one to work with. Any reputable professional ought to be willing to meet with you free to get acquainted and answer anything you ask.

Article source: http://www.nytimes.com/2008/12/23/your-money/financial-planners/primerplanners.html?partner=rss&emc=rss