Financial planners provide individuals and businesses with investment advice and, in some cases, also manage their client’s assets. Financial planners can be particularly valuable in helping business owners to make decisions about both their personal and business finances.  A good financial planner can double the profits of a small firm or help save a company from bankruptcy. Since virtually anyone can call themselves a financial planner, business owners must be diligent in obtaining referrals, checking qualifications and licenses, and inquiring about fees. The real pros can help you map out a route to goals like retirement and estate planning, asset allocation, and tax and cash-flow planning. 


A good financial planner will conduct an in-depth interview to gather information about the client’s income, expenses, assets, liabilities, future goals, and risk tolerance.  Then the planner will use this information to develop a detailed, written financial plan specifically for the client. Financial planners may steer their clients into a wide range of investment products, including stocks, bonds, mutual funds, money market accounts, independent retirement accounts (IRAs), and insurance.  In most cases, clients receive monthly or quarterly reports detailing the progress of their investment portfolios.

Finding a good financial planner

 There is no shortage of good financial planners, but the challenge is to identify them among as many as over 750,000 stockbrokers, insurance, salespeople, and outright cranks who claim to be effective planners.  Unlike, say, a plumber, hairdresser, or neurosurgeon, a financial planner does not necessarily have to open a book, take an exam, or otherwise demonstrate any competence before  hanging out a shingle. 

The first step in finding a good financial planner is obtaining referrals from friends and business associates, preferably those who are in similar financial situations and have similar financial needs. If personal recommendations are not available, trade groups such as the National Association of Financial Advisors, or the International Association of Financial Planning, and the Institute of Certified Financial Planners provide referrals for their members. 

After obtaining referrals, experts recommend that business owners interview at least three potential planners before making a decision.  It may be helpful to examine financial plans that each planner has prepared for clients with similar circumstances, and to gather information about the problems the planners have resolved for other clients.  Though it may not be necessary if the referral came from a trusted friend, the business owner may wish to contact some of those clients directly and ask about the planner’s strengths and weaknesses, responsiveness to phone calls, and willingness to explain things. Since financial planners often work with other professionals – such as attorneys and accountants – the business owner may wish to ask for professional references as well. 

The next step in hiring a financial planner is to conduct a thorough examination of their qualifications and experience. Experts recommend that financial planners have a strong background in finance, accounting, banking, stock brokerage, or a related field, as well as five years experience. Potential financial planners should also be able to show proof that they are licensed with regulatory bodies. In order to obtain a credential such as Certified Financial planner (CF) or Chartered Financial Consultant (CFC), a planner must pass a series of tests, take continuing education courses, and comply with a code of ethics.

In addition, financial planners who provide advice about securities must file a disclosure document known as an ADV with the Securities and Exchange Commission (SEC). They are required to show potential clients part II of this document upon request, which gives information about their educational background, qualifications, fees charged for services, and any business affiliations that could cause a conflict of interest. Although financial planners are not obliged to show clients part I of their ADVs, business owners may want to avoid any planner who is unwilling to do so, as part I outlines any disciplinary problems the planner has experienced.

Fee-Based or Commission-Based Planners

The final step in hiring a financial planner is to find out how the planner will be compensated – through client fees or brokerage commissions. Fee-based planners charge their clients various fees depending on the type of work they perform.  In contrast, commission-based planners do not charge their clients up-front fees, but instead take a commission on the investments they recommend.  Commission-based planners generally work with their clients to create an investment plan for free, and then charge commissions ranging from 1 percent on money-market accounts to 90 percent on first -year insurance premiums. 

In some ways, choosing a fee-based planner may seem preferable because it promotes objectivity and eliminates the potential for conflict of interest. But the fees charged can be expensive. As long as you have confidence in the planner, it really doesn’t matter which type you use – as long as you know how he is making his money. The fee structure should always be spelt out in a written agreement. 

Until an atmosphere of trust develops, between the business owner and the financial planner, it may be best to start slowly, by investing around 25 percent of assets. The amount can then increase over time if the client is satisfied with the planner’s performance.   In order to establish a strong relationship with a financial planner, it is recommended that business owners treat their financial advisor and his or her staff with respect. Don’t call your advisor with paperwork questions; that’s a job for his or her assistant. If you have a complex question, call when the stock market is closed – your advisor will have more time to talk. Most of all, keep the lines of communication open.


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