What is financial planning and why use a Certified Financial Planner?

At some point in every newsletter we suggest you talk to your financial advisor or set-up a financial plan. A financial plan is simply a way to set financial and personal goals which are attainable given your personal financial situation and outlook. Realistic short and long-term goals can be established by first assessing all aspects of your financial health including assets, liabilities, income, insurance, taxes, investments and estate plans. There are many individuals who may call themselves financial planners but there is however, only one type of planner that is certified and that is a Certified Financial Planner (CFP). These planners have years of financial education and have followed a rigorous course of study approved by the Financial Planners Standards Council (FPSC). These individuals must successfully complete certification exams, have at least three-years of related experience, voluntarily ascribe to the FPSC code of ethics and complete on-going continuing education to stay current in financial planning.

A CFP is qualified to help you develop the plan to meet your goals, help you put it into action and track its’ progress. Throughout the relationship a CFP will assist in making changes based on circumstances, life stages, economic factors and changing tax laws.

CFPs are paid for their services a variety of ways. Fee-only planners charge individuals on an hourly or project basis depending on the need of the client. Commission-only do not charge for their advice or the preparation of a financial plan, but earn a commission on the products sold to clients in implementing the plan. Some planners charge a combination of a fee and commission.

Salaried financial planners are found at your credit union and other financial institutions. These financial advisors are staff members who provide their services as a benefit to members/customers. At The Credit Union you do not pay for their services, nor do they receive any commission payments. Like a fee for service advisor relationship the member pays fees on some types of transactions and mutual funds. In some cases these fees are waived or reduced once a portfolio gets to a specific size.

Regardless of how your financial advisor is compensated if you ever feel that you are being sold and not advised it can be a warning sign. Make sure you ask how your advisor is paid, and how they make their decisions. Do not be afraid to ask why they are making a specific recommendation. After all, it is your money and your life their recommendations will affect.

Other questions to ask:

• What is your background?
• What type of training have you had? Education counts.
• How long have you been a financial advisor or planner? Experience counts.
• How many clients do you have? Make sure that they will have time for you.
• How often do you typically meet with your clients? Does that meet your expectation or comfort level?
• How do you communicate? Phone, mail, email – does their preference match with yours?
• Will they help you figure out a budget? Or review the one you have?
• Will they look at your debt and make recommendations for reducing interest costs? Getting investment advice is not your only financial need.

At the outset of your relationship it is very important that you clearly explain your expectations with your financial planner. If you need reminder calls, quarterly reviews or want more of a “don’t call me, I’ll call you” relationship let your planner know.

The most critical piece of advice is not to delay in setting up your financial plan. If you are unsure where to start, need a second opinion on your portfolio or your financial plan we are here to help. Give us a call, send an email or drop into the branch – We C.U.™ so you can meet your goals.