You've got a money question and the guy in the next cubicle hasn't a clue how to answer. You need trustworthy information. But where to start?
We have an entire section devoted to the ins and outs of hiring a financial pro. But for the most general money questions, you're probably looking for a financial advisor (also referred to as a "planner," or "CFP" -- Certified Financial Planner).
Financial advisors are the generalists in the field of money management. They can assess your overall financial picture, with an eye on your investments, savings, debts, insurance, and other big areas of your money life. Some are equipped to offer estate planning advice or input on your tax situation. Many make investment recommendations such as mutual funds or even specific stocks. The best ones can objectively put your finances into context and help you arrive at the best money moves for your future.
What a financial planner can do
A financial planner can help you answer questions ranging from "should I refinance my house" to "is it time to sell this stock?" Most CFPs can:
- Answer specific questions
- Organize and orient your overall financial picture
- Shed light on budget realities and provide tips to reduce spending
- Assess your retirement savings
- Furnish a much-needed wake-up call regarding your debt or retirement savings
- Check to be sure you have all of the basic insurance you need and if there are other holes in your financial plan
- Make mutual fund recommendations
The average cost of advice from a financial advisor starts at around $175 an hour (depending on where you live and the advisor's credentials, of course). After that, the fee structure can get a little more complicated, as you can see in this comparison table. Since the first meeting with a financial planner is usually free, we encourage you to print out the checklist of questions we provide.
What to watch out for
The sad fact is anyone can call herself a "financial planner" in most states. There is no licensing requirement and very little regulation. Noting a pro's credentials (those official-looking designations embossed on the letterhead) is your first line of defense in sussing out a pro. The charlatans don't have and can't use these designations, so the credentials become your seal of quality.
Of course, credentials don't tell the whole story of how much skill an investment professional possesses, and if she is the one for you. There's something to be said for that gut feeling you get when you meet with a pro -- if you trust the advice being offered and feel the planner has a good understanding of your best interests. Don't be fooled by colorful graphs presented to you laminated and perfectly bound. The software most planners use is widely available to those in the industry. Instead, look for substance, and proof that the advice applies to your situation. You want to be wowed.
Also be aware that most financial planners choose investments based on a limited pool of investment products -- mostly mutual funds -- that their firm offers. While that doesn't mean all their recommendations are duds, it might turn out that there are better options out there for your money. You must decide if you're willing to do a little legwork to find out.