Choosing a Financial Planner

As employer investment and retirement options multiply, most workers find that managing their personal finances takes more than a few minutes with a calculator. Many people are shifting some of that responsibility over to financial consultants and opting to pay for advice from private sector financial planners. The planner’s job is to help you develop a workable financial plan that zeroes in on personal goals. Here are some tips on finding and consulting a financial planner.

Please note: TIAA and Fidelity Investments are the only financial investment companies officially associated with the University of Michigan. While there are many companies and financial planners available and you may choose any financial planner you wish, no other financial investment company or individual financial planner has the permission to use the university’s name or logo.

The Plan

Most people want a planner to provide a comprehensive overview of their entire financial situation, including analyses of current finances and long-term objectives. After reviewing your financial circumstances, the planner generally produces a written financial plan. It should include:

  • Your prioritized financial goals.
  • Your net worth.
  • A monthly budget (income and expenses).
  • Your risk assessment—the amount of risk you are willing to take with investments.
  • A specific plan of action that you agree to follow.
  • Compensation

Selecting Your Planner

The two most important criteria you should consider in your selection are solid credentials and trustworthiness. Anyone can solicit business as a financial planner, with or without a professional designation.

Types of Financial Planners

There is a cost to working with a financial planner. Planners’ fees vary depending on the scope of the plan and the amount of assets they manage. Before you select a planner, you should understand the three different types, classified according to their compensation method.

  • Fee-only planners charge either a flat or hourly rate to create a plan. They also may charge a fee of 1-3 percent of the assets they manage.
  • Fee and commission planners, sometimes called fee-based planners, charge lower fees than fee-only planners. They supplement the fees with commissions from investment or insurance products they sell.
  • Commission-only planners generally charge nothing for advice and receive commissions on the products they sell.

Keep in mind that any money you save in fees with a commission-only planner may cost you objectivity in investment advice. When an adviser recommends a product that generates a commission for her or him, he or she may not be able to avoid a conflict of interest.

TIAA and Fidelity Investments

TIAA and Fidelity Investments offer extensive financial planning services free of charge that can help identify your retirement savings goals and stay on target to meet them. This includes free face-to-face consultations to review and update your beneficiaries and advice and guidance on selecting investment funds appropriate for your risk tolerance, savings goals, and time horizon to retirement. Both TIAA and Fidelity have services that can rebalance your portfolio holdings and have an additional fee-based service that provides active account management. To meet with a retirement specialist or attend a workshop, visit Retirement Savings Counseling.

Registered Investment Advisors

A Registered Investment Advisor (RIA) is a person or firm registered with the Securities and Exchange Commission (SEC) and/or a state licensing authority to provide professional financial management services for a fee. An RIA can give investment advice and/or manage your U-M retirement account, including selecting and changing your investment funds on your behalf.

Please note that an RIA is not affiliated with, endorsed by, sponsored by, or a provider, agent, or representative of TIAA, Fidelity Investments, or the University of Michigan. There is no requirement that you work with an RIA.

Before you hire an investment adviser, you may want to carefully read the Form ADV, which is the registration form of the RIA. The ADV will contain information about whether the RIA has had problems with regulators or clients, is properly registered, and describes their business practices, fees, any conflicts of interest, and disciplinary information.

You can view an adviser's most recent Form ADV online by visiting the Investment Adviser Public Disclosure (IAPD) website. You can also obtain copies of Form ADV for individual advisers and firms from the investment adviser, your state securities regulator, or the SEC, depending on the size of the adviser. You'll find contact information for your state securities regulator on the website of the North American Securities Administrators Association. The SEC also provides a comprehensive FAQ on choosing an investment advisor.

Note: If you are an RIA looking to market your services to University of Michigan faculty and staff, review Guidelines for Registered Investment Advisors.

Professional Designations

Professional designations vary in their requirements. For example, a Chartered Financial Analyst—awarded by the Institute of Chartered Financial Analysts—must have a bachelor’s degree, pass three exams and have at least three years’ experience in the field. A Certified Financial Planner—awarded by the CFP Board of Standards—must complete a financial planning education program, pass one comprehensive exam, have related work experience and fulfill a biennial continuing education requirement.

Consult a directory of professional associations, such as the National Association of Personal Financial Advisors or the Institute of Certified Financial Planners (CFP) to find members in your area.

Reviewing Candidates

Consult your lawyer, accountant, or other professionals for recommendations on financial planners. Friends and business associates also can be good referral sources. Narrow your list of planners to those with the strongest credentials and highest recommendations. Interview your choices by phone. Do not hesitate to ask tough questions about the planner’s education and experience, fees, services, regulatory compliance and references.

Make sure the person you are considering is the one who will actually do your financial plan. If someone else will be working on your portfolio, you need to check his or her qualifications as well.

If the planner charges a commission, ask for the SEC’s Form ADV, which describes the planner’s practices, history, qualifications and potential conflicts of interest. It also discloses any legal or financial troubles the planner may have had. You probably should not entrust your finances to any planner who does not fully answer all questions and provide the disclosure form.

If you have found several promising candidates, meet them in person and assess your comfort level: Do you really trust them, do they answer your questions clearly and thoroughly, and do they ask pertinent questions about your goals? Most planners don’t charge for this initial interview.

To further research the background of financial planners, call the organizations from which they received their designations. The SEC would have records of any disciplinary actions brought against planners.

Preparing for a Meeting

There are a number of factors to consider as you prepare for your first planning meeting so you can feel confident and get the most out of your session. You may wish to:

  • List your financial goals in order of importance.
  • Educate yourself about money matters through free financial seminars, local classes, or online financial calculators.
  • Gather your financial records, including copies of all recent financial statements and information about any stocks, bonds, mutual funds, real estate and life insurance you own.
  • Think carefully about your retirement goals, including the age at which you hope to retire, what sources of income you can expect in retirement, and what standard of living you hope to maintain after you stop working.
  • Talk with your spouse or partner about your financial goals and retirement plans (he or she can also attend the meeting). 
  • Be ready to talk about financially protecting your loved ones in the event that you become disabled or pass away.
  • Think about your risk tolerance when it comes to investing your money.

Working with a Planner

  • Always get your planner’s advice in writing.
  • Check financial statements to make sure the planner is following your instructions.
  • Never agree to any investment that you do not understand.
  • Do not sign anything you have not fully reviewed.
  • Keep educating yourself, so you can tell good financial advice from bad.

Additional Resources

Financial Planning Association

(800) 322-4237

Society of Financial Service Professionals

(800) 392-6900

National Association of Personal Financial Advisors

(800) 366-2732

U. S. Securities and Exchange Commission

(202) 942-8088