Ten Things to Know Before You Hire a Financial Planner

1. Anybody can be called a planner.

Avoid amateurs by hiring a professional planner with special credentials, such as Certified Financial Planner or Personal Financial Specialist. This is achieved through meeting certain training standards or having extensive experience.

2. Planning is more important than investing fee only financial planners.

Some planners do not offer complete services. Some planners offer only investment advice, while others focus on one aspect of planning such as taxes or insurance.

3. Expand your options.

Interview at least three financial planners before you hire one. This will ensure that you get the right person to provide the services you require.

4. Refer to your friends and family for a starting point.

Referring a friend or family member can be a great way of finding a financial advisor. For additional references, you can visit groups such as the Certified Financial Planner Board of Standards or the Financial Planning Association.

5. Learn how your planner gets paid.

There are three main types of setups: Fee-only or fee-based and commission-based. Planners who are fee-only don't receive commissions on the products they sell. Instead, they get fees for their advice. While they may be compensated for some products sold by fee-based planners, the majority of their income comes from fees you pay. Commission-based planners get paid by the companies selling their products.

6. You can check the record of the planner with state agencies or groups that issue credentials.

7. Refer to references.

Ask two to three planners about their clients. Then follow up by calling to learn how they perform in particular circumstances, such a financial crisis.

8. Ask questions.

How well the planner knows you will determine how good his or her advice is. It is important that the planner questions your financial goals, risk tolerance, and philosophy. They may not be looking out for your best interests if they don't ask.

9. Ask about their entire product line.

Learn about the financial products that planners sell and what a firm's earnings per sale. Avoid planners who only promote one product.

10. Know yourself.

The best planner will listen to you. Before you hire someone to help you, determine your financial goals, assets and liabilities, risk tolerance and investment style. Do you prefer to be self-directed, or do you need specialized assistance?