3 Things to Know When Looking for a Financial Planner

In the previous blog “What is financial planning?” I shared what working with a financial advisor looks like and the difference between comprehensive financial planning and investment management.

The next step would be finding someone that’s a perfect fit for you. People get stuck because they don’t know what to look for, which then becomes a stressful task that gets pushed to a later date. 

The first thing to be clear about is which services you’re needing because not all financial planners offer the same type of services. There are three common services:

1. Comprehensive financial planning
2. Investment management
3. Project-based planning or hourly planning

Project-based planning or sometimes referred to as hourly planning is working with an advisor for only a specific topic (project); the difference in wording is how they’re billed, which I’ll cover shortly.

Let me put these 3 services together with an example;  let’s say you want help reducing your debt. You have 2 options, first, you can engage with a planner for comprehensive financial planning, or you can work with that person for only the debt management portion, for that specific project, and in this example, you’re not looking for investment management services.

Now that you know which services you’ll need, the second are the common ways for how a client pays for these services.

Paying for investment management

The most common way a firm gets compensated for this service is by charging a yearly percentage based on the account balance that they manage, and that dollar amount is deducted from your investment account (most of the time it’s done quarterly).

Here’s an example: Let’s say you left your employer and want to roll over your old 401(k), the value is $500,000, and the firm is compensated by charging 1% a year, which means that $5,000 a year is taken out of the account, and that’s how you paid for investment management. There’s a little more to it when it comes to the calculations to determine the quarterly amount, but that’s the basics.

Now before I go on to how you pay for the other two services, there’s something important that I want to mention when you’re looking for someone for investment management. First, find out if the planner does investment management? And second, ask if they have a minimum dollar amount for them to take you on? A lot of times you can find this information on the firm’s website.

Paying for comprehensive financial planning

There are two ways you can see this. First, the firm could be compensated by charging a yearly flat fee, or it could be part of the investment management cost that I just covered. At Radiant Wealth Planning these are two different services and we’re compensated for each separately. The benefit is that we can help people with comprehensive financial planning regardless of whether they have investments they would like us to manage or not.

For the third type of service, project-based planning, it can either be done at an hourly rate, or the firm can have a set fee for each project depending on the amount of work. For example, debt management will have it’s set fee, while 401(k) investment allocation will have a different set fee.

The final thing I want you to think about is how you meet with your financial planner; this is a personal preference but an important one to know. Is going to an office critical for the relationship or do you prefer virtual meetings? It’s an important thing to know that not all firms have the overhead of office space, a lot of firms, like Radiant Wealth Planning, only conduct appointments via video calls, whereas firms that do have office space are also able to do virtual appointments. The accessibility to the planner, with both approaches, is the same.

RADIANT Wealth Planning, LLC is a fee-only financial planning and investment management firm located in Newport Beach, CA