FAQ’s

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We sat down with two fund managers, John Tinley and Aaron Pardue earlier this week and gave them the chance to answer some of your most frequently asked questions.

Q: Why should I hire a financial planner to manage my money?

J: A financial planner can connect all the financial points so that you can provide an overall plan for meeting your financial objectives. Training and experience should be given in all kinds of financial products and financial aspects of your life, such as equities, bonds, insurance, taxes and estate planning, to give you the right recommendations for your own personal situation. You can also save thousands of dollars in tax deductions from financial planners and find more profitable investment products at little or no additional risk.

Q: How much does a financial planner cost?

A: The fees will vary depending on the education and experience level of the financial planner, and how the fees are assessed. In general, a financial planner will charge based on one of two ways: commission or fee-only. If the planner charges based on commission, the amount will usually be a percentage of each transaction or assets under management. If the compensation structure is fee-only, he or she will typically charge an hourly rate or will quote a specified fee for the services provided.

Q: Which certifications should my financial planner have?

A: There are a number of different certifications for financial planning. While a financial planning practitioner may have several appointments or certifications, make sure that he or she is at least licensed and in good standing with the licensing authority. The Certified Financial Planner, Chartered Financial Consultant and Registered Investment Advisor are three of the most frequently used designations.

A Certified Financial Planner (CFP) has expertise and experience in all financial planning fields. A CFP has completed study courses on over 100 financial management topics including stocks, taxes and pension plans. The Certified Financial Planner Code of Ethics must also be followed. A CFP is responsible for trust.

J: A ChFC has extensive experience in helping individuals evaluate their financial goals. A candidate must complete the program and pass the American College tests to obtain the ChFC certification.

A Registered Investment Advisor (RIA) doesn’t need any special training or certification. However, an RIA must be registered with the security agency of the state in which he or she does business, and must also be registered with the Securities and Exchange Commission if assets under management exceed $25 million.

Q: How can I pick a good financial planner?

J: Select a financial planner with client experience in similar circumstances to yours. You will also want to make sure that the financial planner takes into account your best interests and doesn’t sell you products that don’t suit your needs. Interview future financial planners and ask about credentials, management strategies and performance history. Call past customers for references.

Q: What is the difference between asset allocation and diversification?

J: In similar circumstances select a financial planner with customer experience. You also want to make sure that the financial planner takes your best interests into account and does not sell products that do not meet your needs. Contact future financial planners and ask about credentials, management strategies and the history of performance. Call for references from past customers.

Q: How should I vet financial advisors?

A: Your plan should be to interview several financial consultants to seek a consultant that meets your investment style, has a good return track, is open about its fee structure, and reveals any conflict of interest. In the course of the interview, ask questions that address these key points. Ask the consultant for information and follow it up to make sure that the consultant is trustworthy.

Q: How can I check out the background of a financial advisor?

A: If the advisor is a Certified Financial Planner, check the Certified Financial Planner Board of Standards. The Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), and the National Association of Securities Dealers (NASD) are also places to check and make sure the financial advisor has not had disciplinary action taken. Another great source of information is the advisor’s past clients. A good advisor won’t be afraid to hand out two or three solid references.

Q: Where can I find a financial advisor who has no ties to any companies who push for selling products?

A: A Certified Financial Planner is responsible for putting your needs and interests above its own. Although the CFP may benefit from a product that is recommended to you, recommending a product that is not in your best interests is unethical for a CFP. If you care about the advisor pushing products, hiring a strictly fee-based (as opposed to commission-based) advisor is also a good choice.

Q: What is involved in financial planning?

A: Financial planning looks at a person’s overall financial picture. A financial planner will often ask a prospective client to fill out an extensive questionnaire in order to understand his or her financial needs and goals. The planner will usually put together a detailed, short-term 5-year plan designed to improve the client’s overall financial position. That may be followed by a long-term plan, along with suggestions about how to save and invest for retirement and a child’s college education at the same time. The planner will also look at ways to reduce current and future tax liabilities and protect assets by having the proper life, health, disability and long-term care insurance coverage in place. Finally, he or she may offer suggestions for estate planning.

Q: What is a time horizon?

J: Time horizon refers to the time a person has to save for a specific event. For example, for the parents of an eight-Year old child the time horizon for a college savings account could be 10 years, but for the parents of a three-year-old 15 years. Similarly, the time horizon for a 30-year retirement saving could be 35 years, while a 60-year-old who started to save late in life could be 15.

Q: What’s the difference between financial planning and retirement planning?

J: Financial planning covers all aspects of the financial well – being of an individual. It includes savings, investment, pension and higher education savings plans, insurance cover and estate planning. Pension planning covers only retirement investments.

Q: How are financial planners paid?

J: The financial planners are paid on the basis of commissions or fees, or a combination of both of them. Commissions are generally one-time charges based on each product or transaction sold. Fees may be based on the percentage of management assets, an hourly rate or even a flat fee.

Q: What questions should I ask a financial planner?

A: First, inquire about your experience in a situation similar to yours. Secondly, ask about training and certification. Thirdly, ask about the width and depth of the offered products. Fourthly, ask how services are compensated. Finally, make sure that the financial planner is fully licensed and well-preserved. If the financial planner is a CFP, please check the website of the Certified Financial Planner Board for a quick review.

Q: How often should I see my financial planner?

J: Whilst your financial planner can make another recommendation on the basis of your circumstances, it is a good idea to see him once a year. You should also consider an appointment in advance of life-changing events like marriage, childbirth, divorce or a large amount of money.

Q: What is fiduciary responsibility and why is it important?

A: Trusteeship means to trust or trust. A professional financial services company who is responsible for his or her clients must put the needs and interests of a client before him or her. Certified financial planners are trustworthy for their customers. While stock brokers and insurance agents are regulated and licensed, they are not trustworthy for their customers. The recommendations that they make must only comply with the’ admissibility standard’ which means that the product’s risk level must be appropriate for the client based on income, assets, risk tolerance or other standard set out in the prospectus. Consultants with fiduciary responsibility are less likely to get a quick buck on products.

We would like to thank John and Aaron for their time, I’m sure they enjoyed it as much as we did. While we’ve covered the basics of financial planning here, there is much more to implementing a financial plan. To make sure you’re on the right track, feel free to send us a message.

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