5 Questions You Should Ask A Financial Planner Before Hiring Them

Hiring a personal financial planner can feel a bit like handing a stranger the keys to your future; or at least giving them a role in it. This is a person you're trusting to guide the financial decisions that will, hopefully, set you up for long-term stability and success. These could include everything from streamlining your daily budget and maximizing your tax returns to setting realistic pathways to buying property, retiring, and other major life goals.

With that much on the line, simply going with the first polished pitch or impressive résumé just isn't going to cut it. And, even if you're considering a financial planner that comes highly recommended from someone you trust, they still may not be the right fit for you. It all comes down to how well they mesh with you specifically, including your priorities, your risk tolerance, and your very definition of success. With all this in mind, you'll have to find out what type of financial planner you're looking at. And you'll also want to ask some specific questions about their experience, approach to meeting your goals, and compensation. 

Not all financial pros are equal in their experience and, importantly, certifications. If you are looking for someone to provide hands-on support in investing, grow your wealth substantially, or realize long-term major financial goals like buying a new home, it's important to look for a Certified Financial Planner (CFP). While many planners and advisors get started in their career paths by studying finance in college or learning the ropes hands-on at a firm, CFPs go the extra mile by undergoing rigorous training under the CFP Board of Standards, a national non-profit organization that places high focus on ethical financial advisory services. Every individual certified with the board is required to have 4,000 to 6,000 hours of hands-on personal financial planning experience.

It's also wise to ask for references or reviews from previous clients, as simply having experience may not always be indicative of high skill and commitment. Other than that, the amount of experience your financial planner has depends on your specific needs (for example, the size of your portfolio or the exact services you want) and comfort level. More experienced and well-reviewed planners may be more expensive, so your budget will also be a factor. 

Different planners have different approaches to growing your wealth and setting you up for success, especially when it comes to risk levels and diversification. But an experienced and knowledgeable financial planner should be able to clearly explain how they plan to grow your portfolio. When you're initially consulting them them, explain the specific goals you have in mind and then ask how they'll help you get there. Depending on the complexities, some may take some time to put together a proposal for you, while others may prefer to discuss similar experiences they've had and outline key tactics they like to use. Because your money is at stake, it's crucial that you and your planner see eye to eye on these things and agree on an asset allocation approach that works for you.

While you're on the subject, it's a good idea to ask how realistic they think your goals are, as well as what benchmarks they think you should set. After all, you want someone who will help you avoid common mistakes, like this one that financial planners say could make you pay more in retirement.

Your financial planner is there to help you manage and grow your wealth, but they are still doing a job for their own financial benefit. So, in addition to asking what your upfront costs will be, it's also important for you to ask how much they charge on an ongoing basis and what their compensation structure looks like. Some charge flat fees or hourly rates for the services they provide, while others operate on a commission structure based on investments they make on your behalf. 

There's not technically a wrong answer here. As long as you've established the amount you're comfortable paying for the service, you'll know if the professional's fees are right for you. It's also important to analyze all the minor details in their compensation structure. If your financial planner charges a commission, they're probably more motivated to put your money into high-performing investments. However, take caution; it's worth doing a little more digging to make sure they're truly operating in your best interest. That brings us to the next question you should be asking.

Be sure to ask the financial planner if they are a fiduciary. In fact, consider just asking this question outright before inquiring about their specific approach to building wealth. A fiduciary financial planner is a special type of professional who is legally bound to act strictly in your best interest. If the financial planner you're thinking about working with isn't a fiduciary, consider it a major red flag. 

While it should seem like every professional financial planner should act in the best interest of their client, the truth is that some work on commission and make decisions primarily around what will benefit themselves or the firm they work for. If their firm has specific investment products, for example, a non-fiduciary planner may steer you towards putting your money there to help drive up their value, regardless of whether that's actually aligned with your preferences or financial well-being. Fortunately, going with a CFP offers an easy way to make sure that the planner is a fiduciary — all certified financial planners are. 

Any financial planner worth their fee is going to keep a close eye on your progress to make sure your wealth growth is on track. All investment portfolios are naturally going to experience ups and downs over time. What matters is their overall performance, which, with the right moves, should lead to long-term gains. A good planner keeping an eye on things will be able to spot any areas that need improvement and recommend changes in a timely manner. Before hiring a planner, ask them to clearly explain how they plan to track your progress and what steps they'd take if your goals aren't being met at expected intervals.

Going along with this, it's also important to ask how often you can expect check-ins with them and how you'll be able to monitor progress yourself. For example, many financial planners now have client portals in their software, so you can log in and check your account firsthand. Others may provide regular reports in addition to a personal login. Either way, you shouldn't move forward unless you feel confident that your progress is going to be tracked closely and you'll have tools for monitoring the performance yourself.