Financial planning is one of the most important processes for everyone in their 20s and 30s. It is a long journey that involves several decisions, questions, and choices. Financial planning may seem daunting, but it does not have to be.
Many people think that personal finance does not pertain to them and that you need to be an investor to gain from financial planning. This could not be further from the truth. Whether you are just starting your career or have been on the job for years, you must begin looking toward retirement.
The earlier you begin this process, the more money you will have at retirement. Another advantage of starting young is that it gives you time to make mistakes and right any wrongs, so you do not have to fix them.
Top Answers to Tough Financial Planning Questions
If you are like most people, you may not know how to start your financial planning. That does not mean you should entirely give up on it. The key to financial planning is asking the right questions. Here are ways you can verify a financial planner’s credibility.
- “I’m a certified financial planner.”
Ensure that the financial planner you work with is certified and recognized by the proper organizations. Check their credentials. Ask for their business card or online profile. You can also look up their name, educational background, and experience in the Certified Financial Planner Board of Standards (CFB Board) records.
The CFP Board certifies financial planners and keeps a database of all its members.
Other organizations that certify financial advisors include the Certified Public Accountants (CPA) board, the Personal Financial Planning Association (PFPA), and the National Association of Personal Financial Advisors (NAPFA). These organizations also have databases of certified professionals that you can check if you are looking for someone they have vetted.
If they do not offer this information, move on to another resource.
- “I work on your behalf. I’ll help you map everything out.”
Your financial planner should explain how they will work on your behalf. They should give you a roadmap of what they will do for you, including where, when, and how often you will meet them. They should also tell you what they must do as part of their practice and which are optional.
Your financial advisor should be someone who can answer all your questions and provide services specific to your needs, lifestyle, location, and more. For example, if you are from Alpharetta, Georgia, ensure you are looking for a financial advisor in Alpharetta and not someone from Atlanta. A local financial advisor can be your guide to various investments.
Additionally, your financial planner should explain how they will help address your financial situation, whether saving more money or planning retirement. If they cannot explain how they will help, move on to another candidate.
- “You have nothing to worry about; I’ve never violated any rules.”
Regulators like the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) can discipline financial professionals who violate laws or rules governing their profession. If either authority has disciplined your prospective financial planner, it is a sign that you should entrust your money and financial goals to someone else.
Ask your planner if they have ever been disciplined by one of these bodies and what happened.
- “For transparency, I will charge you this much per month/year.”
When asking your financial advisor how much they will charge you, you would want to hear precisely when and how much it will be. Their answer can determine their trustworthiness. They must be willing to provide you with a sample of their fee schedule so that you can see what they charge other clients for similar services.
This step will save you from any hidden charges. If your potential financial advisor avoids answering directly—or if they give an answer that seems too good to be true—proceed with caution.
- “Someone will take care of you if something happens to me.”
Getting an idea of your financial advisor’s plan is important if they become ill or pass away. Some planners have partners or associates who can step into the role should something happen. Others keep a small team on their payroll, so they do not have to worry about finding someone new in a crisis.
As such, a financial advisor’s ability to offer this support level is worth asking about.
Ask About Financial Planning Today
It would be best if you did your homework before choosing an advisor. They should directly respond to your inquiries, have thorough, written documentation of their fees, adhere to fiduciary standards, have a client bill of rights and code of ethics, and prepare a succession plan.
It may be difficult to challenge your advisor with these questions, but your future self will be glad you did your research. Continue to develop a money mindset, and you will surely be on your way to financial freedom.