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Top 5 Mistakes to Avoid When Picking a Financial Planner

Top 5 Mistakes to Avoid When Picking a Financial Planner

July 07, 2023

Top 5 Mistakes to Avoid When Picking a Financial Planner

Making the decision to work with a financial planner is usually a smart move. Why? For one, they can help you manage the money you’ve worked so hard to earn. In addition, they can provide guidance and advice that might increase the odds of you reaching your long-term financial goals. However, choosing the right financial planner isn’t always easy, and the wrong choice can potentially end up costing you both money and time. In this blog post, we’ll share the top five mistakes you should avoid when selecting a financial planner.


Mistake #1: Not Understanding the Planner's Credentials


A financial planner should be knowledgeable and possess the right education and credentials. But it’s important to note that not all credentials are created equal or may even be needed for your particular situation. Before you select a financial planner, it’s advisable to research the different types of certifications and licenses they might have and which ones are relevant to your needs. Confused about a financial planner’s credentials? Just ask - if they are reputable and worth their weight in salt, they should welcome the opportunity to explain how they are best qualified to help with your needs.


Mistake #2: Not Considering the Planner's Area of Expertise


Different financial planners have different areas of expertise. Some specialize in investment management, for example, while others might focus on estate and retirement planning. It’s essential to work with a financial planner who specializes in the area where you need help. A good financial planner will be happy to explain their area of expertise and how they can assist you.


Mistake #3: Not Asking about the Planner's Experience


Experience counts when it comes to financial planning. Be sure to ask any potential planner how long they’ve been in the business and how many clients they serve. They could have many talents and the right credentials, yet their experience may not translate into practical guidance for your specific situation. Look for financial planners who have extensive experience working with clients in similar situations and a track record of success managing their clients' finances.


Mistake #4: Not Questioning the Planner's Compensation Model

Many financial planners are paid for their services through fees or commissions, and some accept a combination of both. Before you engage a financial planner, know how much they will charge, when the payment will be due, and how it relates to the services you need. Your planner should disclose any fees or commissions they collect without hesitation during the consultation, so you don’t face any surprises or conflicts of interest later. It's up to you to decide whether the compensation structure fits your budget and aligns with your expectations.


Mistake #5: Not Requesting Any References


Just like referrals from a contractor, getting referrals from a financial planner can allow you to learn more about the quality of their services from people who have actually worked with them. Before choosing a financial planner, consider asking for references or testimonials from past clients. Based on their feedback, you should gain a better perspective on the financial planner's expertise, professionalism, and customer service.


Opting to work with a financial planner can potentially have a positive impact on your financial well-being. As you go through the process of selecting one, try to avoid the abovementioned mistakes that could potentially lead to negative financial consequences. Instead, consider doing your due diligence prior to signing any agreements with a financial planner to ensure that he or she is the right fit for your specific financial needs and goals. Ultimately, taking the time to understand and vet potential financial planners now can help save you from future financial woes resulting from having made hasty decisions.