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Industry Resources |
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Questions to Ask
These may be questions you are asking yourself or they be questions you ask your potential Colorado Springs Financial Planner. Either way, here is the
least you should ask:
Question 1: What is comprehensive financial planning?
There is financial planning and then there is comprehensive financial planning. A financial plan may cover one or more of important areas of your life like insurance needs, retirement needs, and education needs. However, a comprehensive financial plan will integrate all of those areas of your life into one concise plan that fits your needs, abilities, goals, and dreams. For example, a husband with one child has a need for insurance. Let’s say that something in the area of $500,000 is appropriate. Someone who does a financial plan will sell the husband a permanent (meaning it lasts until the day you die) $500,000 policy with an annual premium of $3,200 and feel good about it since he protected that family. A comprehensive financial plan will look much deeper and discover that a large amount of that money is to pay for the house, allows the wife to continue to stay home and be a parent, and pay for college for the child. With this new information, a comprehensive financial planner is able to save the couple over $1,800 a year. This money can then be invested for college, retirement, or another goal the couple had.
Plain and simple, comprehensive financial planning goes very, very deep.
Question 2: Can I get that in writing?
We at the Colorado Springs Financial Planning Resource Center cannot stress enough of getting everything in writing. Many people get the initial fee in writing, but what about the recommendations? The fact is, many financial advisors will not put their recommendations in writing because they are not qualified to (it requires extra licenses) or they do not want to. Why would you want to work with someone who will not stand behind his own work?
Question 3: What kind of experience do you have?
This is a very fair and legitimate question to ask. You want to be sure that you have a financial advisor with enough experience to assemble a plan that can fit all of your needs. Experience is not measured merely in years in the industry; it is also measured by the amount of business completed by the advisor. Many financial advisors in Colorado Springs have been in the investment business for 5, 10, even 20 years, yet have never done a comprehensive financial plan. Conversely, you may find an advisor who has only been in the business a year or two yet has done several financial plans. You also need to look at the office from which the financial advisor comes. Is it a team atmosphere or an “every man for himself” atmosphere? Comprehensive financial planning will touch on many things like investing, life insurance, tax planning, and estate planning just to name a few! Not every planner can be an expert in all of these fields, but every office can have advisors that specialize in one or two of these fields. So, if there is a team environment, you can be sure that you will get the absolute best financial plan possible.
Question 4: How do you get paid?
You should ask every single financial planner this question. Basically, there are three ways financial planners get paid: 1.) Fee only, 2.) Commission only and 3.) A combination of ways one and two.
Fee only
A fee-only financial planner is one who will charge you a fee up front to do your comprehensive financial plan. These fees can range from several hundred dollars to tens of thousands of dollars based on the complexity of the plan, the services to be provided, and the experience of the advisor.
The upside to a fee-only financial advisor is that you generally get a well-written plan and the recommendations are free from biasness. The downside is that fee-only planners generally charge a great deal more than their contemporaries and you rarely get on-going service and accountability.
A fee-only financial advisor is good for someone who can hold themselves accountable to their own decisions and dreams and make those tough decisions today for the payoff later. Most families experience bumps along the way that may tempt them to deviate from their plan. If they do deviate, their dreams may not be accomplished or they may never get back on course.
Commission only
A commission-only financial planner is one who will do the plan for free and then make his money off of the products he proposes to fulfill your needs.
The upside to a commission-only financial planner is that you pay nothing up front and you are not obligated to do business once you have the plan in hand. The downside is that many times these kinds of planners can only offer products from their own company. Additionally, since most plans take several hours to complete, you may or may not be getting unbiased advice and the plan may not be as in-depth since the planner is not guaranteed any kind of payment.
A commission-only financial planner is good for you married couples just starting out, families who have hit a rough patch and want a way out, or those who want to get a ballpark idea of where they are.
Combination
A fee-plus-commission financial advisor generally is one who will charge an initial fee to do the plan and then makes commission off of the products he sells to you.
The upside to a combination planner is that the plans are generally in-depth, the planner represents several other companies, the fees are usually lower than a “fee-only” planner, and it usually marks the beginning of a client-planner relationship. The downside is that the fees can be out of reach for some or there may be some biased in product recommendation,
The fee-plus-commission financial advisor is a good fit for those who are a little more established in life, married couples with or without children, and those who need someone to hold them accountable to achieve their goals and dreams.
Question 5: What kinds of products do you sell? Can you shop the products to other companies?
This question is key to finding out if this person is an insurance salesman portraying a financial advisor and a true financial planner. There are a handful of insurance salesman who call themselves financial planners in Colorado Springs. You want to make sure that your financial planner can offer you a combination of insurance (if you need it) and investments (like mutual funds). It is also imperative that your planner be able to ask several different companies about the best rate. (Beware; some so-called “financial advisors” can only get a rate from someone other than their company if their own company turns you down.) Some companies offer better rates for young smokers, people who are over 50, people with a family history of cancer. If you planner cannot shop around, you may be paying a higher rate than you need to. (That goes for all kinds of insurance: health, disability, life, and long-term care).
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