When you look for a financial planner, there are six important questions you should ask BEFORE you hire the financial planner or invest in any products the planner recommends:1. What are your credentials to be a financial planner?2. Have you earned any degrees or certifications?3. How many years have you worked as a financial planner?4. How are you compensated for the financial advice you provide?
5. Are you paid any performance bonuses, commissions, or other form of compensation based upon the amount of mutual funds, stocks, annuities, insurance policies, or other financial products you sell; and 6. How frequently will I be able to speak with you about my financial plan and accounts?Based on how the financial planner answers these questions, you should have a better understanding of whether the advisor has the necessary experience and education to meet your needs.It is also important to determine whether the financial planner will try to sell you stocks, bonds, annuities, mutual funds or other investment products to earn commissions. If so, is the advisor compensated in a way that allows you to receive impartial advice that is in your best interest? Far too many people end up in annuities, mutual funds, and life insurance products that cause them to lose money only to find out later their financial advisor was paid a huge commission to sell a specific product.Before contacting a financial planner, organize your financial records. Most financial advisors will ask for the aggregate value of your estate before meeting with you, so using financial planning software will help you calculate an accurate amount. Then, refer to our find a financial planner page for information on how to locate a qualified professional in your area.
10 Issues to Discuss With Your Advisor
1. Amount you need to save to pay your living expenses and medical bills in retirement;2. Amount you need to save to pay for long term care expenses and whether long term care insurance should be part of your financial plan;3. Amount and type of life insurance you need to provide for your spouse, children, and other dependents; 4. Amount of short and long term disability insurance you need to pay your living expenses in the event of injury or chronic illness;5. How to add beneficiary and pay on death designations to your retirement, brokerage, and bank accounts that are consistent with your estate plan;6. Whether a strategy of gifting to your children and other heirs could reduce your estate taxes;7. Whether creating a separate fund for charitable giving would reduce your income taxes or estate taxes and allow you to support your church, favorite charities, or alma mater;8. Amount you can contribute annually to an IRA to reduce your income taxes – or if you are over age 70, the minimum required distribution amount or MRD you need to begin withdrawing from your IRA annually;9. What changes to your investment allocation may be more suitable to your current risk tolerance, investment experience, and desired financial goals; and
10. How to develop an income plan based on your income and expenses that provides you options to cover any shortfalls in your income during retirement.
See IRAs and your estate plan for tips and suggestions on related financial planning topics.