Today is the first day of spring and it’s a welcome sight for those of us in the Northeast. It’s been a rather interesting winter, to say the least. Although spring cleaning moves to the front burner, one does note that many people begin to look carefully at whether they have the right financial plan. During the winter, they kind of hibernate but with the advent of spring and the April 15th tax deadline looming, people generally start to take stock, much like they do on January 1st with New Year’s resolutions. My friend, John Napolitano, who is the chief executive officer of U.S. Wealth Management located in Braintree, Mass., and who is the author of the best-selling book Success as a Personal Financial Planner (published by Alpha), knows quite well how to build a thriving career in one of today’s hottest fields. So he has set forth specific questions that one should ask when looking for a financial planner. I should also say that John is quite blunt when it comes to financial planning. “Anyone with a pulse can call themselves a financial planner, and many people have hired planners who later turned out to be salesmen who didn't give a darn about their long-term plan.”
But he doesn’t advocate that you should avoid hiring a planner; he just wants you to know how to find a good one.
1) Ask for references. “Don't be afraid when you call the references to ask about more than their satisfaction with the planner. Ask about the services the planner has performed. Ask whether the planner helped with the estate plan, the portfolio, the business succession plan or whatever else is important to you. Also ask if the planner regularly reviews and updates the plans.”
2) Check the credentials and experience. “You don't want to hire a rookie and you don't want to hire someone without credentials.”
John points out that he looks for someone with a CFP designation or some other advanced designation that reflects additional training and experience. For example, consider CLU, ChFC, CPA, or JD.
He notes that these credentials have codes of ethics that the certificate holder must follow. “And remember, just because they have a credential or two doesn't mean that they have years of experience. Ask specifically how long they've been doing planning and see if that agrees with the references that they give you.”
3) Registration. Are they registered with the state or SEC as an investment advisor? “It sounds weird, but the actual registration for a financial planner is as an investment advisor--even if the planner is not an investment specialist. Also ask to see part 1 and part 2 of their form ADV. Form ADV is their registration form as an investment advisor.”
4) Conflicts of interest. “There are debates over whether you should work with a fee-only advisor or one who also accepts commissions. I'm not hung up on the fee-only thing but I am big on disclosure and undisclosed conflicts.”
John says that there are many firms with independent sounding names who are really insurance agencies in disguise. “It's not that an affiliation with an insurer makes the planner bad. It's just that many of those insurers limit the planners' access to products and require the planner to try to place the clients insurance with that company first.”
You can reach John at email@example.com.
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