There are a lot of different ways to increase your financial success, including strategies for making money, saving money, and investing money. However, we’re all limited by our own knowledge and understanding of how to build wealth.
That’s why it’s helpful to partner with professionals who have a broader understanding of the foundational principles of financial success.
6 Things to Look For
The right professional can help you build wealth, protect your assets, and optimize your financial future in ways you may not even realize. However, finding the perfect financial planner isn’t as simple as picking the first person who appears in a Google search. You need to do your due diligence and make sure you’re working with someone who truly aligns with your financial goals.
- Proper Credentials
Not all financial planners have the same level of education or expertise, which is why it’s crucial to check their credentials before making a decision. One of the most respected designations in the industry is the Certified Financial Planner (CFP®) certification. CFP® professionals have to complete rigorous coursework, pass an extensive exam, and adhere to certain ethical standards. Working with one ensures that your planner has a well-rounded understanding of financial planning and is going to put you first.
Beyond CFP® certification, some financial planners specialize in certain areas. For example, if you’re focused on retirement, a Retirement Income Certified Professional (RICP®) might be a good fit. If you’re a high-net-worth individual with complex tax situations, a planner with a Certified Public Accountant (CPA) or Chartered Financial Analyst (CFA) designation could be a smart choice.
- Fee Structure
Before hiring a financial planner, you need to know how they get paid. The fee structure can significantly impact the kind of advice you receive and whether the planner has any conflicts of interest. Financial planners typically fall into one of three categories:
- Fee-Only. These planners are compensated solely by the fees their clients pay. They do not receive commissions from selling financial products, which means their advice is more likely to be unbiased.
- Commission-Based. These planners earn money by selling insurance, mutual funds, or other financial products. While this doesn’t automatically mean they’re acting against your best interest, it does mean there’s an incentive to recommend certain products over others.
- Fee-Based (Hybrid Model). This structure combines both fees and commissions. Fee-based planners may charge an upfront consultation fee but also earn commissions from financial products they recommend.
For most people, a fee-only financial planner is the safest option because their income isn’t tied to selling you something. They are legally required to act as a fiduciary, meaning they must always put your best interests ahead of their own.
- Tax Expertise
One of the biggest mistakes people make is assuming that financial planning is only about investing. While investments are a major component, tax strategies play an equally important role in wealth building. A well-designed tax strategy can help you maximize your retirement savings, reduce your taxable income, and keep more of your hard-earned money.
For example, a financial planner with a deep understanding of tax-efficient investing can help you decide whether a Roth IRA or traditional IRA is better for your retirement goals. They can also help you implement tax-loss harvesting strategies to offset capital gains and minimize taxes on investment profits.
Financial firms like Lighthouse Financial specialize in blending investment strategies with tax planning, ensuring that your portfolio is structured in the most efficient way possible. Instead of just growing your wealth, a tax-savvy planner helps you preserve more of it by reducing your tax liabilities over time.
- Specialization
Not all financial planners have the same areas of expertise, so it’s important to choose someone who specializes in what you need. If you’re a young professional just starting out, you might benefit from a planner who focuses on budgeting, debt management, and long-term investing. If you’re a business owner, you may need someone who understands business succession planning and tax-efficient strategies.
For retirees or those nearing retirement, it’s crucial to work with a planner who can guide you through Social Security optimization, tax-friendly withdrawal strategies, and estate planning. The right financial planner will tailor their advice to your situation instead of offering generic recommendations.
- Communication
A financial planner might have impressive credentials, but if they don’t communicate in a way that makes sense to you, the relationship won’t be productive. Some planners prefer to take full control of managing your finances, while others focus on educating and involving you in the process. Think about which approach aligns with your preferences.
- Track Record
Before committing to a financial planner, do some research into their track record. In other words, what kind of experience do they have? Are there some client reviews you can go over?
Ideally, you’ll want to ask for referrals from friends, family, or colleagues who have worked with a planner before. If you’re considering a specific firm, check online reviews and testimonials to see what clients are saying about their experience.
A good financial planner should also have a clean regulatory record. You can verify their background using resources like FINRA’s BrokerCheck or the SEC’s Investment Adviser Public Disclosure (IAPD) website. These platforms provide details and history on any complaints, disciplinary actions, or ethical violations a planner might have faced.
If you notice any red flags, it’s probably best to go in another direction and find another planner. There are so many talented advisors in the industry; you won’t have trouble finding one with a clean record. It’s not worth risking your financial portfolio with someone who has shown themselves to be irresponsible in the past.
Find the Right Fit
Finding your financial planner is all about finding the right fit. You want to look for someone who is skilled, experienced, and works well with your personality, needs, goal etc. Thankfully, there are tens of thousands of advisors to choose from – so there are options out there. It’s simply up to you to weed through them to identify the best fit.
