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Financial Planning and Investments

Ask the planner what her qualifications, be sure you understand the amount of risk involved, decide if you are willing to live with that risk before making an investmetn decision.

Many older adults work with "financial planners" or "investment advisors." Most of them are capable professionals; however, some may not be. Many states do not require financial advisors to have specialized training or licenses. However, many financial advisors obtain advanced training for their jobs. For example, a financial planner can earn the distinction of C.F.P. (Certified Financial Planner).

Before your make an investment decision, be sure you understand the amount of risk involved, and decide if you are willing to live with that risk. (Risk means the possibility that you will lose some, or even all, of your investment.) A responsible financial advisor will tell you if an investment is too risky for you.

Before you work with a financial adviser, don't be afraid to ask these and any other questions you feel need a full and open answer. Any professional will welcome them. *

1. What are your qualifications?
Many people offering financial services call themselves financial planners. However, financial planning is a detailed, comprehensive process. It requires hands-on experience and a strong technical understanding of topics such as personal tax planning, insurance, investments, retirement planning and estate planning - and how a recommendation in one area can affect the others.

Ask the planner what her qualifications are to offer financial advice and if, in fact, she is a qualified planner. Ask what training she has successfully completed. Ask what steps she takes to keep up with changes and developments in the financial planning field.

Ask whether she holds any professional credentials including the Certified Financial Planner designation, which is recognized internationally as the mark of the competent, ethical, professional financial planner..

2. What experience do you have?
Experience is an important consideration in choosing any professional. Ask how long the planner has been in practice, the number and types of firms with which he has been associated, and how his work experience relates to his current practice. Inquire about what experience the planner has in dealing with people in similar situations to yours and whether he has any specialized training. Choose a financial planner who has at least two years experience counselling individuals on their financial needs.

3. What services do you offer?
The services a financial planner offers will vary and depend on her credentials, registration, areas of expertise and the organization for which she works. Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or taxation. Those who sell financial products such as insurance, stocks, bonds and mutual funds, or who give investment advice, must be registered with provincial regulatory authorities and may have specialized designations in these areas of expertise

4. What is your approach to financial planning?
The types of services a financial planner will provide vary from organization to organization. Some planners prefer to develop detailed financial plans encompassing all of a client's financial goals. Others choose to work in specific areas such as taxation, estate planning, insurance and investments. Ask whether the individual deals only with clients with specific net worth and income levels, and whether the planner will help you implement the plan she develops or refer you to others who will do so.

5. Will you be the only person working with me?
It is quite common for a financial planner to work with others in his organization to develop and implement financial planning recommendations. You may want to meet everyone who will be working with you. Financial planners often work with other professionals, including ones you already use such as your lawyer and accountant.

6. How will I pay for your services?
Your planner should disclose in writing how she will be paid for the services she will provide. Planners can be paid in several ways:

  • Commissions: The planner is compensated if you purchase financial products to implement a financial planning recommendation. In some cases, the commission is paid by the suppliers of financial products such as an insurance company. In other cases, you pay the commission, for example, if you buy shares of a publicly traded company. Commissions are usually a percentage of the amount you invest in a product.
  • Salary: The company for which the planner works pays the planner a salary. The planner's employer may get its revenues from fees paid by clients such as yourself or in commissions paid by clients making a purchase or by the suppliers of financial products.
  • Fee-for-service: Planners paid on a fee-for-service basis may charge an hourly rate, set a flat rate for a specific service or be paid a fee based on a percentage of assets or income. In some cases, compensation would be a mix of fee and commission. You should also ask if the planner or organization receives any benefit other than commission, such as advertising and promotion subsidies, from suppliers of financial products.

7. How much do you typically charge?
While the amount you pay the planner will depend on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs would include the planner's hourly rates or flat fees or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.

8. Could anyone besides me benefit from your recommendations?
Ask the planner to provide you with a description of her conflicts of interest in writing, for instance, any business relationship with the companies or ownership interest in any company that supplies financial products sold by the planner and the planner's employer.

9. Are you regulated by any organization?
Financial planners who sell financial products such as securities and insurance or who provide investment advice are regulated by provincial regulatory authorities and may also subscribe to a code of ethics through a professional association. Others who are members of the accounting and legal professions are usually members of professional bodies that govern their fields. Planners who hold the CFP designation are subject to disciplinary proceedings of Financial Planners Standards Council.

It is a fair question to ask if he has ever been the subject of disciplinary action by any regulatory body or industry association. You can verify the answer by contacting the relevant organization. Ask the financial planner whether he subscribes to a professional code of ethics such as the Certified Financial Planner Code of Ethics.

10. Can I have it in writing?
Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference

* Excerpted from Certified Financial Planners Board of Standards, Inc.


Information courtesy of Elizabeth A. Kelly, Attorney/Mediator and Bill Beyers, Attorney at Law, Elder Care Network Participants. The information contained on this website is NOT a substitute for legal advice and no representations are made as to the accuracy of this information.

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