FORT LAUDERDALE, Fla. -- Brent Neiser, executive director of the Denver-based Institute of Certified Financial Planners, says people spend too little time choosing a financial planner.
"Consumers will spend more time evaluating the difference between various toasters than they will for financial advisers."
And Marianne Shine, a financial planner with Shine & Associates in Deerfield Beach, Fla., says finding the right financial professional for you may not be as simple as going down a checklist.
"There is only one way to know for sure and that's to take the first step and start working with someone."
Experts say choosing a financial planner should be a thoughtful process, leading you to the most compatible professional to help you invest, save and budget.
"Don't go dump your money on a desk and say, 'OK, I trust you to take care of it.' You shouldn't do that with your own mother. You should always be the one to understand and make the decision," Ms. Shine said.
The Atlanta-based International Association for Financial Planning has a Consumer Bill of Rights that spells out what kind of service you are entitled to:
You have the right to:
* Receive competent financial advice from a qualified financial planner who has a high level of training, education and experience.
Look for the following credentials: designations such as certified financial planner, chartered financial consultant, or chartered 22 financial analyst; a law degree; a degree in financial planning, money management or a related business.
Work with a planner who is registered as an investment adviser with the Securities and Exchange Commission, registered with a state agency, and licensed to sell investments and insurance, as applicable.
Make sure the planner is registered as an investment adviser -- that is the minimum step a planner should take to comply with regulatory requirements. To sell investments and insurance, a planner must be licensed with the National Association of Securities Dealers.
* Receive references from the planner. Get names and telephone numbers of the clients and other professionals he has worked with.
* Receive advice that is tailored to your financial needs.
Your financial professional should base your plan on the following six steps: information gathering; goal setting; identification of financial problems; preparation of written recommendations; implementation of recommendations; and review and revision of the plan.
* Receive a financial plan that is cost-effective.
Get an estimate of the total costs involved and know what services the planner will provide.
* Receive sufficient information on the risks and benefits of each investment recommended.
The planner should explain everything clearly to you, including the worst-case scenario.
* Receive full disclosure about how the planner is compensated.
Four methods of compensation are: fee-only, fee-and-commission, commission-only and salary.
The Institute of Certified Financial Planners recommends getting all the basic information about the planner in writing. That way you can compare.
"A lot of times what [people] don't ask for is a disclosure document which can take the pressure out of the selection process," Mr. Neiser said. "Get a tangible description of what the person does."
* Receive a full explanation of how the final plan is to be implemented.
Find out from what companies the suggested investments come, if the planner is selling only products on which he or she makes a commission, and whether you can buy products from other sources.