Things to know about Financial Advisors

10 Taboos Between You and Your Planner

1. Never write a check made payable to your planner, other than for his fee. Your checks should be made payable only to mutual funds, brokerage firms, or insurance companies. No legitimate planner would ever allow a client to write a check for investments or insurance payable to him personally or to his firm.

2. Never allow your planner to list himself as a joint owner or beneficiary on your accounts. The only place your advisor's name should appear on documents is as the advisor of record.

3. Never lend money to your planner.

4. Never give commission-based planners discretionary authority. When you establish a discretionary account, you're giving the advisor permission to buy and sell investments on your behalf without obtaining your consent prior to each transaction. This is generally not a problem when the advisor is compensated by fees (of whatever type), because such advisors are not paid to execute trades (and thus, they have no incentive to do so). But granting discretionary authority to a planner who earns commissions can be dangerous, because such an advisor will earn money every time he executes a trade. If you give him permission to trade at his discretion, he could earn a lot of commissions while your account falls in value.

5. Never let your planner sign your name to any document.

6. Never let your planner allow you to sign a blank form or contract. Cross out sections that do not apply.

7. Never let your planner use his address on account statements instead of yours. You should receive periodic statements directly from the mutual fund, brokerage firm, or insurance company. Never allow your planner to have such documents go to his office instead of to you.

8. Never let your planner sell you an investment that isn't available from others. Advisors who want you to buy proprietary products usually earn additional compensation for doing so.

9. Never let your planner share in your profits. I'd never let an advisor share in my profits unless he was willing to reimburse me for my losses.

10. Never let your planner assign any agreement with you to another advisor. If your planner retires or sells his practice, you immediately are relieved of any and all contractual obligations you may have had with your planner.

What to look for in a Financial Planner

Someone who has been providing advisory services for compensation for at least 5-yrs.

Someone who is a member of the Financial Planning Association.

Someone who is well regarded by others in the field.

Someone who has a clean regulatory record.

Someone who handles at least $20 million in assets for clients.

Someone who has at least 100 clients.

Someone who has worked often with people similar to you.

Someone who routinely provides recommendations in the same areas that are of concern to you.

Someone who takes the time to learn of your needs before offering recommendations to you.

Someone who considers the tax implications of their strategies before recommending them to you.

Someone who will review your overall status in major areas of personal finance, including investments, insurance, taxes, real estate & mortgages, college and retirement issues, employer-provided benefit plans, and estate planning, and offer you recommendations as warranted.

Someone who never disparages others in the field. The best in the field are true financial planning professionals. But too many so-called "planners" and "advisors" consider others to be competitors instead of colleagues. Be wary of those who spend much of their time explaining why they are better than others, or why others are not good. True professionals will explain why their advice differs from that offered by others, but most often, the conversation will be "good vs better" instead of "good vs bad."

There are, after all, many ways to achieve financial success, not just one. Of course, professionals, if needed, will warn you against those who are widely regarded as crooks or incompetents. But if your personal financial advisor has a position everyone else is a crook or incompetent, you'll be better off working with a different financial advisor!

Finding a financial planner will take lots of work and research.