How to Find a Financial Planner

Is there any difference between financial planners, investment advisors, financial consultants and stock brokers? Aren't they all professionals who offer the same type of financial services and advice for consumers?

There's actually a wide range of activities performed by people holding the various titles of financial professionals. A stock broker acting as a financial consultant or planner could be under pressure to sell certain securities, which means they sometimes lead their clients to purchase those securities. While advisors are obligated by the law to provide advice that serves their clients best interest, it doesn't mean there are no unethical investment advisors operating out there. When financial professionals bend or break the law, or act in their own personal interests, the consumer can pay the price.

How can you pick a financial planner for guidance during these troubled economic times? How do you know you can trust the person you choose? When the economy is doing well, it's not difficult to hire a financial advisor for help growing your money. But when the market is in complete chaos during economic down-times, many investors end up losing money to fraudulent advisors. While experienced investors can make their own investment decisions, not everyone has that experience or the time required to do it all without the help of a financial professional. While there are no guarantees or 100% foolproof methods for selecting an experienced and honest financial professional to assist you with your investments, there are some tips you can use to minimize your chances of getting a bad apple.

Here are some tips for finding a trustworthy financial planner:

1) Even though you're looking for someone to assist you with your investments and financial considerations, the most important aspect to remember is you are responsible for your family's money. The financial professional you hire will 'report to you', so even if you can't claim to understand the details of investing to the level of your financial planner, it's your responsibility to make sure that your professional is handling your money properly. A financial advisor or planner considers you a client; but you should consider them an employee of your 'business' – which is your family's money.

2) When looking at different advisors and planners you'll want to continue thinking like an employer and look at your potential professionals' background. Do they have a criminal record? What's the regulatory record? You can find regulatory records for many financial professionals on the Financial Industry Regulatory Agency's Web site, Finra.org

3) Check with the advisor's clients. You can ask for references from their current and past clients with lives similar to yours. It doesn't help if you've got a friend with 8 kids recommending an advisor who only deals with family needs, and you're childless – or vice versa. Your financial needs are different depending on your lifestyle. Check with current and past clients of an advisor, and ask how often the advisor communicated with them, whether or not the advisor made mistakes and if so – did he or she own up to them? You'll get the most accurate information from people who the advisor did not personally refer – so as you're talking to clients, see if they know anyone else who has used that particular financial professional, and keep going to find several people to question.

4) Find out how the advisor makes money. If a salesperson is working on commission, you know they're going to push the highest priced clothing on you regardless of how it looks. They have a biased opinion. The same is true for financial professionals – if they get commission on certain securities, they're going to push those over others. Ask advisors you're considering to explain exactly how they make money by managing your portfolio. Some will earn money from a combination of factors, from commission to fees or a flat rate, or a percentage of the money you invest. If they seem to change the subject or are not very forthcoming in how they make their money, you should look elsewhere. For advisors who work on commission, ask for their commission schedule for each product so you can see whether or not your money is being steered into those products.