We have many Atlanta Financial Planners! The choice isn’t always an easy one. How will you know that your planner is reputable and trustworthy? Perhaps more importantly … how will you know when he or she isn’t?
These five red flags are a good indication of whether the Atlanta Financial Planner sitting across from you is someone you should trust with your money.
1. They are not Certified
There are a lot of good planners out there who aren’t certified financial planners. But the certification is becoming the industry gold standard, partially because CFPs® are required to adhere to the CFP® Board’s standards of professional conduct, which basically means we must put clients’ interests ahead of our own in all circumstances.
It’s always a good idea to work with someone who has the CFP® designation, which is issued after completing a CFP® Board-approved personal financial planning curriculum, passing a rigorous exam issued by the Certified Financial Planner Board of Standards, meeting experience requirements and passing an ethics and background check.
2. They Offer to Manage Your Money for “Free”
Atlanta Financial planners are usually paid in one of two ways: Either through upfront fees, which can be hourly, retainer or a percentage of the assets they manage for you, or through commission, which means the planner is paid each time he buys or sells an investment.
Fee-only payment structures are more desirable for most clients, as there’s no financial incentive (commission) for a planner to buy or sell, whereas working on commission encourages planners to make trades, rather than solely look out for your best interest—called a “fiduciary” duty. (You want to be sure that the planner you choose is a fiduciary.)
Sometimes commission-based brokers can represent their planning as being free of charge: “Nothing is ever free,” You’ll likely be paying through fees and commissions on the investments they choose.
To find a fee-only certified financial planner, visit the National Association of Personal Financial Advisors (NAPFA), which is the largest group of fee-based financial advisers.
3. They say we always Outperform the Market
If a financial planner tells you that she can outperform the market, that’s a major red flag. In fact, due to government regulations, it’s illegal to advertise statements that promise a specific return.
Outperforming the market—that is, getting better investment returns than the market average—is extremely difficult to do consistently, and requires taking a lot of risks with your investments. While some fund managers (paging Warren Buffett) have an aptitude for consistently outperforming the market, it’s a rare planner who can do the same—and results are never guaranteed. Either way, in the pursuit of these high returns, she’ll be exposing your investments to higher risk.
Instead, look for an adviser who, when looking at your portfolio, can advise on proper asset allocation based on your risk tolerance and time horizon, as well as through economic ups and downs.
4. They Don’t Ask About Your Financial Goals
Your planner isn’t just there to crunch the numbers. They are suppose to be helping you make a plan for your money and your life. You should be looking for someone who has similar values to you.
Ideally, you’ll likely want to work with someone who is in a similar life stage. Are you a parent? A planner with children may be better able to understand your need to save for college. Does your CFP® have a specialty? Some planners have an area of expertise, like insurance, estate planning, divorce or retirement—a fact you might want to consider if that’s a particular need of yours.
Management Style Makes You Uncomfortable
Financial planners can manage your money for you or manage your money with you. As different people have different needs when it comes to money management, there is no right way to work with a planner—it’s up to you to decide how hands-on you want him to be.
When you sign on with a financial planner, there will be a written agreement of how the two of you will manage your money. Read this carefully, and ask questions if you’re unsure about anything. Are you signing your accounts over to this planner? Will he check in with you before making a trade, or when rebalancing your accounts? If you’re uncomfortable with anything in the agreement, bring it up immediately.
In keeping up with the hundreds of Atlanta Financial Planners out there, keep in mind that it’s very important step in your life. If you need to ask questions, Scarlet Oak Financial Services are here right in the Midtown Atlanta Area. Don’t hesitate to Contact Us