Pick a Financial Planner

What to look for when you want help plotting your financial future.

Kevin McCormally: I am Kevin McCormally of Kiplinger's; I am here with Janet Bodnar, Deputy Editor of Kiplinger's Personal Finance magazine to talk about hiring a financial planner. Janet, there are lot of people now who do not have the time nor the inclination or the skill to handle their own money. They want to hire somebody to do it; how do you find a financial planner that you can trust? Janet Bodnar: Well I think, Kevin, the best thing is word-of-mouth. You go to people you have used a financial planner, you ask for recommendations and then you go and visit the financial planner and interview that planner. Kevin McCormally: I interview the planner, what kind of questions do I ask? What am I looking for? Janet Bodnar: The first thing you are looking for is the SEC registration that the planner has to file in order to be in business and what you are looking for, in particular, is any disciplinary action that may be filed against the planner. You would also want to know about the planner's educational credentials, professional training, any specialties they have. You would also want to know how they are compensated. Kevin McCormally: Okay, I know they are compensated differently, but what am I looking for when I ask that question? Janet Bodnar: What you are looking for is whether they are compensated by Commission that is they get a cut of any product they sell or whether they are paid by some, sort of, flat fee or flat rate. Some people feel that they are going to get more objective advice if they are paying a flat fee as supposed to dealing with a planner who is getting paid via Commission. Kevin McCormally: What is this going to cost me? What do planners charge? Janet Bodnar: Well if you are going to pay by the hour, it could be anywhere from a $150 to $300 an hour. If you are going to pay by the plan, like you want the planner to take a look at your retirement plan, see if you are on track, maybe $500 to $1000, and if you are actually going to be giving the planner money that he or she is going to manage, you will probably pay a percentage, may be 1.5% to 2.0% a year. Kevin McCormally: So if I have got $300,000 worth under management that costs me $6,000 a year. Is the cost of the planner, the determining factor? Janet Bodnar: Not the determining factor, certainly important, but really your comfort level with the planner that you are seeing is really the critical thing here. You want someone that you can trust, that you can feel comfortable with. Kevin McCormally: Thank you very much Janet.