Two interesting pieces of information have popped up by two highly reputable sources, one dealing with tips on choosing a financial planner and the other showing survey results of the five most frequent mistakes made when selecting such an advisor.

The first comes to us courtesy of Lending Tree, which is the country’s top online lending exchange. They advise that before settling on a financial planner, there are some important questions to ask, such as:

  • What are the planner’s qualifications? In other words, is there a degree in economics or related fields? How about designations or certifications? Does the planner belong to a reputable organization?
  • Area of specialty. While many financial planners are generalists, providing solutions for a broad range of needs, others cater to specific groups such a members of a particular profession or age group or even income bracket. What’s yours?
  • How about financial philosophy? This is highly important before you open your checkbook. For example, make sure the planner is clear on your risk and debt tolerance and that similarly, you are clear on the planner’s approach.
  • Your own goals and priorities. A good planner will want to know these as well as your lifestyle considerations and tax situation.
  • References and sample plans? An experienced planner should be able to give you names of clients with similar goals or outlooks to your own, as well as at least one sample plan.
  • Who are you working with? Is it the planner or with an assistant or associate? If the latter, you must meet that person, as well.
  • How long has the planner been in business?
  • How is the planner to be paid? It can be a flat fee, an hourly rate, commissions only, some combination of commissions and fees. The initial consultation should be free of charge. Following that, ask for an estimate of how much their time and services will cost you going forward.
  • Keeping informed. Do you get an annual report, or what?
  • Finally check those outside problems. If your planner is also a certified investment advisor who is qualified to recommend stocks, bonds, and mutual funds, then that person will have had to register with either the SEC or the state securities agency. Has the planner ever been sued or disciplined?

Now, keeping the above in mind, we now turn to the Paladin Registry, which helps consumers find, evaluate, and select quality advisors. In a recent survey, Paladin discovered that more than 97 percent of respondents said that they selected advisors who marketed themselves as trustworthy investment experts; however, they did not have a process for gathering information that would help them validate the advisors’ claims. Instead, Paladin noted that these consumers simply based their decisions on verbal information from advisors.In addition, 83 percent of respondents said they relied too heavily on advisor personality in the selection process, and after hiring the advisor discovered that personality had nothing to do with competent, ethical advice and services. Moreover, some 82 percent said they leaned about advisors from the advisors themselves and did not have an objective third party providing impartial information.
Being influenced by track records of the investment products the advisors recommended was cited by 77 percent and finally, 64 percent said they were excessively influenced by a firm’s name -- assuming that big firms only employed or licensed competent, ethical advisors. As a result, the consumer didn’t ask questions about credentials or business practices.

The bottom line is that it is not as easy selecting an advisor as many people think. It takes time and patience, but the rewards, when selecting a good one, are pretty good.

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