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What to look for in a financial planner for your retirement investments

by Jim Sloan

In the aftermath of the Great Recession, many Americans are uncertain about what to do with their retirement savings accounts.

Many of them have lost jobs and the 401(k) accounts that went with them, and are trying to figure out where to roll over the investments in those retirement savings accounts.

Others became disillusioned with the promise of the 401(k) savings accounts--having lost so much money when the stock market dropped--and are looking for more reliable ways to make investments for retirement. Should they just use the best savings accounts they can find? Is there a high yield savings account they should consider?

As a result of these and other questions, many people have started looking for a financial adviser to help them. It's a smart move, but finding a financial adviser can be a daunting task. Here's why:

  • Many financial advisers will only work with you if you have a lot of money--more than $500,000, for instance.
  • There are nearly 100 different professional designations for financial advisors, according to the Financial Industry Regulatory Authority (FINRA). Finding out which acronym fits your needs can be profoundly confusing.
  • There are certain duties a financial planner will perform and other jobs you'll just have to do yourself. Those who think they can hire someone and sit back and relax may be disappointed.

What to look for in a financial planner

According to Consumer Reports, there are really just four credentials you need to look for in a financial planner:

  • Certified Financial Planner (CFP): These folks have passed a 10-hour exam and have years of experience.
  • Chartered Financial Consultant: This designation requires at least eight college courses and 30 hours of continuing education each year. These professionals typically focus on insurance.
  • Certified Public Accountant/Personal Financial Specialist: These are CPAs with special training.
  • NAPFA-registered Financial Advisor: These are fee-only planners who have met the strict requirements of the National Association of Personal Financial Advisors.

What to avoid

There are many people who present themselves as financial planners, and their business cards will have an impressive list of acronyms. But many of those acronyms only camouflage the fact that the planner is really a salesperson who makes commissions by selling you products that you may or may not benefit from. Some may be outright frauds.

According to The Sacramento Bee, the three things to consider when hiring a financial advisor are: credentials, credibility and compensation.

You can check an advisor's credentials on the FINRA website under its "BrokerCheck" feature, as well as the U.S. Securities and Exchange Commission website, which lists the employment history and any customer disputes of investment advisers and firms under "investor information."

Doing your due diligence

To gauge a planner's credibility, meet with several before hiring one, and ask them each the same questions about their background, the scope of the work they will do for you and compensation. Experts usually recommend a planner who is "fee only," meaning they won't be charging you commissions. A "fee-based" adviser usually charges commissions.

You will also have to determine how your adviser will be paid, whether it's an hourly rate, a set amount for each consultation or a percentage of your total assets. This may be determined by what type of relationship you want with the advisor--a one-time investment tune-up or a long-term relationship with monthly, quarterly or annual investments reviews.

The bottom line is that you need to move cautiously. Don't make a quick decision based on someone's recommendation or a fancy string of titles. Figure out what you feel you need from an adviser and then interview several before making a choice before turning over your life's savings accounts and investments to someone.

Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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