Only 10 percent of the nation's more than 500,000 licensed financial planners are qualified to render such advice, investigators for Consumer Reports say.Training and experience. In addition to at least five years' experience, the planner should have a strong grounding in accounting, investment analysis, and estate planning, possess a recognized professional credential such as Certified Financial Planner (CFP) and be current with new developments in areas such as tax laws. Ask for names of recent clients to call as references.
Compensation. Have the planner put the charges in writing and request a copy of the ADV Part II -- the disclosure form advisers must file with the Securities Exchange Commission or state securities agency. If a planner won't provide such information, walk away.
Service expectations. You want a plan tailored specifically to you -- not one filled with boilerplate generalities. It should clearly state the assumptions that went into its development -- including a realistic estimate of how inflation will affect your future income needs and the rate of return forecast for each suggested investment.
Financial planning is a largely unregulated industry and virtually anyone who can afford business cards can set up as a "planner," the report says. It claims the industry is made up of "planners" of every degree of competence and integrity -- from expert and honest to clueless and ethically challenged.
If you're in the market for such services, the report recommends comparing the qualifications of at least three planners and scheduling a personal interview with each to question them on the following topics:
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