Many people wonder why anyone would pay money to a financial advisor when so much free financial advice is available in books, internet etc. The prime reasons are accuracy, accountability and customization.
Why Free Financial Advice could be dangerous
Of course, countless financial information is available on the internet and other sources. But, the problem lies on accuracy. It is nearly impossible to determine what is accurate and appropriate to your individual requirements and objectives. It is obvious that what is right for your friend may not be right for you. If you make financial decisions based on free financial advice that is inappropriate to your requirements and objectives, it could be a detrimental to your financial well being.
The main problem with free financial advice is that they know nothing about your individual financial situation, goals etc. They are unaware of your risk tolerance or time horizon. They offer one size fits all financial advice. Another big danger is that these free financial advices are without recourse. If such free advices cause you to lose money, you have no recourse. It is always more expensive than expert advice.
What is a Certified Financial Planner and Why You Need a Financial Planner
The prime advantage of hiring a certified planner is that they see your financial situations as a whole. He will study each and every aspect of your financial life. With a sound knowledge of your risk appetite, your outstanding liabilities, your needs and requirements, he will come up with financial recommendations that will take care of each aspect in total. Thus, a certified financial planner makes your financial life better.
A certified financial planner is a financial advisor who meets the requirements established by the CFB Board of Standards. Certified planners are trained to develop comprehensive financial plans. They access your financial situation, troubleshoot problem areas and recommend appropriate options. They assist you with a wide variety of financial decision making. A certified financial planner should be expertise in various investment strategies, insurance, retirement accounts, taxes etc.
What to Look for When Choosing a Certified Financial Planner
It is important to choose a certified financial planner as you will be working very closely with your financial planner. Ensure to know what services will be delivered, what their responsibilities will be.
When choosing a CFP, ensure to look at the advisor’s experience, qualification and their area of expertise.
There are various types of financial planners. The three general compensation categories that a CFP will fall into: Commission based, fee based and fee only. Each offer different service ad is compensated differently. Understanding how and how much a planner should be paid is another important factor to look for.
It is good to talk with your friends and relatives to see what their experiences are. Do intense research and make sure to check with the various regulatory boards to see if there has been a complaint lodged against the planner.