How to Pick a Financial Planner Who's Right for You

To quote an obscure Liverpool band from the 1960s: "Help! I need somebody. Help! Not just anybody." Now, the Beatles probably weren't singing about their desire for a good financial planner, but as we get older, finding one can become a more pressing concern. Take, for example, Motley Fool Answers listener Bernie, who is 50 and not feeling so self-assured about the process of choosing a money pro. How, he asks, should he go about doing it?

In this segment from the July mailbag show, hosts Alison Southwick and Robert Brokamp -- along with special guest Ross Anderson, a Certified Financial Planner at Motley Fool Wealth Management -- give him their best tips on the subject.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on July 30, 2019.

Alison Southwick: The next question comes from Bernie. "I am 50 and want to make sure my wife and I are doing everything we can for our financial health." Isn't that awesome?

Robert Brokamp: That is nice!

Southwick: "Starting with listening to Answers." That's not what he said but I'm putting those words in his mouth.

Brokamp: It's implied. It's implied that's what he's doing.

Southwick: He's keeping good company. "With that said, who should we see? I assume a financial planner. If so, what credentials should they have and what fees would be considered reasonable?"

Brokamp: Well, Bernie, I would start by asking yourself what kind of help you're looking for. Are you looking for someone to just manage your investments? Are you OK doing that on your own? Are you looking for someone to help you with your retirement plan? Or are you looking for someone who wants to look at every aspect of your finances and look at the whole thing comprehensively?

I would start there -- knowing what you're looking for -- and then look at fee-only financial advisors that are in your area or elsewhere if you're comfortable working with someone online or over the phone. The places we often say you can go find a fee-only financial planner are the Garrett Planning Network, National Association of Personal Financial Advisors (NAPFA), or our very own Motley Fool Wealth Management.

You can go online, look at profiles, see who's offering what you're looking for. I would say choose, maybe three and then just meet with them. Most of those folks will offer a free meeting. At Garrett they call it the free "Get Acquainted" meeting. You talk about what you're looking for. They can tell you whether they provide it and then you can choose a fit. If you want someone to manage your money many firms have minimums; so, you have to bring over maybe $250,000 or $500,000 of investments, so that's something to keep an eye on.

The next question was how to get paid. Generally speaking, if you want them to manage your money, you're going to have to pay a percentage of your assets each year. The average, these days, is about 1%. And then if you do that, they will often throw in the financial planning services with that. If you just want the financial planning, they usually pay by the hour or by the project. The hour these days, is around $150-300 an hour. Project is $1,500 to $3,000. I've heard upwards of $5,000.

What determines the price? Partially the experience of the financial planner. Someone who's more experienced can charge more; but, also the complexity of your plan. If you have businesses, if you have real estate, if you have a lot of assets scattered all over the place you're probably going to end up paying more.

When it comes to credentials, I'm a little biased, but I would say the gold standard for financial planning is the certified financial planner designation which just so happens to be something that both Ross and I have -- the CFP designation. We had to take six classes, pass them and take a test.

Anderson: I think it's seven classes now.

Brokamp: Is it now?

Anderson: Yes, it's gone up.

Southwick: When you say it like that, though, it doesn't make it sound that hard.

Anderson: Well...

Southwick: Could you make it sound a little harder? "We had to take seven whole classes and pass a test!"

Brokamp: Well, I don't know about your test, but when I took the test it had a 55% pass rate.

Southwick: There we go.

Brokamp: There we go. Does that sound a little better?

Southwick: Yes, thank you!

Anderson: It's a 10-hour national board exam, basically; at least when I did it, and they've shortened the exam time, now, too. No, it was a brutal experience.

Brokamp: Right. If you are looking for investment expertise, you'll often see the CFA. That's the gold standard there. That's really tough. That's three tests. That is a tough designation. Neither of them I would say are necessary, but what they indicate is that it's someone who has taken the time to learn as much as possible about their profession and take their profession very seriously.

A couple of things I'll point out, though. Make sure when you find someone to do a little background check. You can look up something called BrokerCheck and see if anyone filed any complaints against someone. If someone's been in the business for a long time, they probably do have a few complaints. What you want to see is how it was resolved.

And if they say they have a designation, make sure they actually have the designation and when I say this, I bring up a recent Huffington Post article by Casey Bond. It asked the question, "Who is Patricia Russell, CFP?" She's mentioned in many articles. Quoted all over the internet. It turns out that after Casey Bond looked into this, this person doesn't exist.

So not only is this person not a CFP practitioner, it's not even this person's real name. If you look on her LinkedIn page, it says she went to MIT and Oxford. It's a pseudonym. It seems to me, based on what I read in the article is it's just a front to send people to this credit repair company.

So as you come across someone, do a background check and don't take everything they say for granted.

Anderson: The other place to look is the SEC's website. It's AdviserInfo.sec.gov and "advisor" is with an "er." I think we still disagree in the industry on how to spell advisor, but that's the investment advisor public disclosure search, because somebody like myself is a registered investment advisor. I'm not a broker. I used to be. I used to have that brokerage license, but FINRA BrokerCheck would say I'm not registered, even though I'm still licensed through the SEC.

Brokamp: I'm going to add here that if you go to the CFP website and look up my name on Find a Planner, you're not going to find my name because I don't offer any services. There's another site where you go just to verify, and both Ross and I are on both of those. You're also in Find a Planner, by the way. Just so you know in case anyone checks up that Bro is a big liar.

Rick Engdahl: Maybe you need to take another test.

Anderson: Yeah.

Brokamp: Could be.

Anderson: Can't wait!