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By R. Firmin
If you’re like many Americans, the whole topic of financial planning is more than a little daunting. There are professionals for that, right? Well yes, and no. There is an entire profession devoted to financial planning and those in it want you to think that you need them. But do you?
All it takes to become a financial planner is a few business licenses, a short five-day course, a few fees, a test, some sales training and the ability to sell, sell, sell. Few financial planners are certified and even certification is no guarantee of competence.
To further complicate matters, there are some excellent financial planners who carry no certification. My financial planner isn’t certified but he leaves no stone unturned in being informed. Perhaps his best skill is that he listens to what his clients have to say. Most financial planners never really learn financial planning strategies. They don’t have time because they have to reach their sales quotas.
Most financial planners are actually insurance salesman. They get their biggest fees and commissions from selling insurance policies. Certainly, insurance has its place in a portfolio, but financial planners often recommend their clients put way too much of their money into insurance products. And many times the client doesn’t even realize that what he’s buying is actually a repackaged universal life or variable universal life policy.
One of the most important questions to ask a financial planner is how he or she is compensated. It’s certainly within your right to know if they’re working for your interest, or theirs. The incentives that financial planners receive to sell an insurance company’s policies are often so lucrative that the shine of gold can alter their judgment. Do you get excited when your financial planner wins a fantastic vacation to a beautiful resort because he was able to convince you to buy a product that may or may not be the best for you?
While no one objects to a professional being fairly compensated for services rendered, you can be sure that the less you understand and the less you are informed; the more it will cost you. You need to be sufficiently educated so that you can make responsible decisions with a financial planner and not leave the decision of how much and where to invest solely in their hands.
You don’t have to have an economics degree to learn the basics of money management and investing. If you spend most of your life working and earning money, doesn’t it make sense to spend some time learning how to manage it? That doesn’t mean you shouldn’t utilize the services of a financial planner, it means that if you choose to work with one, you have enough knowledge to know if what he’s offering is in your best interest.
Remember that a financial planner works for you. You hire him or her to execute your wishes and advise you. No one has more interest in the success of your retirement account or other investments than you do. You are the only person who has no conflict of interest in choosing your investments.
About the Author: Download a free financial worksheet and financial calculators at
ronfirmin.com
. Ron Firmin has been President & CEO for companies in the financial services, real estate and mortgage banking industry. He now runs 2 companies and coaches others on how to manage their money.
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