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Home Uncategorized How to... Hire a Financial Consultant

How to… Hire a Financial Consultant

By Sarah Jackson
Still tucking your money under your mattress and hoping that it magically multiplies? Not a smart decision, especially if you’re a parent. It’s time to start thinking about how you’re going to afford those years of education and health care — and toys and clothes and vacations and summer camps.

The list of child-related expenditures goes on and on, but savvy financial management, expert advice and foresight can go a long way in keeping your finances flowing.

Is Financial Planning Right for Me?

Managing and investing money requires not only a bit of financial acumen but, more so, a substantial amount of time — something most parents are lacking. That’s why so many families seek outside assistance to reach their financial goals, whether that means saving for college education, retirement or even day-to-day expenses. Others, who might have the expertise and interest in investing, may seek assistance in some of the more complicated issues, such as estate planning or tax preparation.

Bob Keeley, CFP, an Annapolis-based financial advisor with Edward Jones Investments, finds that many clients arrive at his office overwhelmed by the investment process. “Families today are looking at the future, seeing things on TV and being hit with a lot of different information,” Keeley says. “I help them to hone in and define realistic investment goals, and we work together to budget to reach those goals.”

A lot of young parents balk at the idea of hiring a financial planner, arguing that they either lack the required assets or haven’t reached an age where it’s necessary, but Susan Morris, AFC, Extension Educator at the University of Maryland’s Family and Consumer Science department, debunks those misconceptions.

“Financial planning isn’t just for the big-wigs; it’s for all of us,” she explains. “By planning, you give yourself some wiggle room so that you can sleep at night knowing you have financial freedom regardless of what you make.”

Setting and working towards financial goals are things that everyone — regardless of age — should do, Morris adds. The sooner, the better.  “The time value of money is incredible,” she says. “If you start [investing] when you’re younger, it’s amazing what you’ll save over the course of your career versus someone who waits even 10 years.”

OK, so What Does a Financial Consultant Do?

Beyond helping clients outline their goals for the future, a financial consultant helps them define their appetite for risk when it comes to investing. For example, how would you and your family respond to an unsuccessful investment — or one that is a total loss?

It’s important to keep in mind that no investment is risk-free. According to Keeley, determining your tolerance for risk goes beyond labeling oneself an aggressive or conservative investor. “When working with a client, I often use word pictures of how an investment works to really get them to verbalize whether they feel comfortable about an investment or not,” he explained. “Oftentimes, clients discover they aren’t as comfortable as they thought when faced with the prospect of loss.”

Armed with your investment goals and your tolerance for risk, consultants will establish a customized investment plan, which is typically outlined in a written investment policy statement. This plan should reflect all aspects of your financial situation, as well as outline investment strategies that fall within your comfort range.

How Do I Choose a Financial Consultant?

Selecting a financial consultant isn’t a task to be taken lightly. Remember, you’re entrusting this person with something very important — your money — and that trust must be earned. Talk to your friends and colleagues for recommendations and set aside time to meet with several candidates.

Unlike doctors or lawyers, financial consultants do not need a professional degree to solicit business, making it all the more important to look at a potential consultant’s credentials.

Certification, Morris says, shows that a professional has gone through an extensive and rigorous training and exam process. “I personally wouldn’t go to anyone that doesn’t have some type of certification,” she cautions. “You need to feel completely comfortable with this person, as they are going to know a lot of intimate things about you and your family.”

Formal designations within the industry include: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), Certified Investment Management Analyst (CIMA) and Certified Public Accountant (CPA). To verify a consultant’s credentials, call the member organization or request to see the consultant’s ADV form, which will include educational background, certifications and information as to how the individual is compensated.

Fostering a relationship with a financial consultant is an important, perhaps crucial, step towards you and your family’s financial future. Don’t be lulled into complacency, though. Hiring a professional doesn’t absolve you of all responsibility. It is crucial, Keeley warns, for clients to remain active participants in the investment process. After all, he says, “It’s your money and it’s your responsibility.”

Sarah Jackson is a freelance financial writer.


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