I’m amazed by the number of my friends and acquaintances who are having financial difficulties in this economy. Even those who are saving find that there aren’t enough coins in the piggy bank to maintain the lifestyles they want. Many of us seem to really lack money management skills and knowledge, which has a huge impact on our lives. I concluded a recent blog post by asking, “Why don’t we talk and think more about money? Or maybe I should ask, why don’t we talk and think more about money in more productive, helpful ways?”

Since writing that, I’ve decided that in order to talk and think about money in more productive, helpful ways, I need to consult an expert. I’m grateful that my friend Robert Cooper, a Certified Financial Planner™, has generously agreed to answer some of my questions about financial planning. With over 15 years of experience in banking, finance, and financial planning, Robert had some great information to share with “newbies” such as myself, and I’m happy to share it with you.

What exactly IS a financial planner?

There are essentially two types of representatives in the financial business. For our purposes I’ll call them advisors and brokers. Laws are changing everyday regarding the responsibilities of these different roles. However, as the law stands today, advisors are people who give advice for a fee, and the Securities and Exchange Commission regulates them. Brokers sell investment vehicles, and they are self-regulated through the Financial Regulatory Agency (FINRA). Brokers can also give advice if it is “incidental to the sale of a security”.

So should I be looking for an advisor or a broker?
Without getting too detailed, it is important you seek out the type of representative for your needs. If you need advice, you should seek out an advisor. If you are comfortable with your decisions and just need someone to help manage your portfolio, you might find a broker is the way to go. Like many representatives, I can wear either hat depending on the situation and needs of my client. It is important that your advisor indicate what hat she is wearing, and how she is getting compensation (more on that later!)

How can you tell if you need a financial advisor?
When you have an ache or a pain and you are not sure how to treat it you call a doctor. When you are involved in a legal dispute or have a question on how to complete a trust or a will you consult a lawyer. When you have questions about how to manage your money, you should consult a financial advisor. Money is arguably just as important as health in maintaining our lifestyle. It is naive for many people to think they can solve their financial issues without some guidance. Even I, as a financial advisor, have someone else look at my plans periodically just to make sure I am on the right path.

Wait, can’t I just read some financial planning books to find out what I need to know about managing my money?
Books, TV specials, and friends are good sources of advice. However, only a licensed and educated planner keeps up with all the changes in laws, and will be able to apply her knowledge to your specific situation. Just like reading online health articles, financial planning tips are found everywhere and are very helpful. But when the need for a checkup or more critical medical care is needed, we go to the doctor. Make sure you use a financial advisor as your financial “doctor”.

What if I’m not doing anything right? I’m not even sure what kind of advice I need!
A financial planner should be able to help you at whatever level you need. Some people just need to be reassured that their own actions are keeping them heading in the right direction. Others need to be helped with how to create a household budget and keeping track of expenses. Some people simply need help implementing a retirement plan or educational investing and want an advisor to help them. Whatever the need, a financial advisor should be able to help you.

Okay, I’m sold! How do I choose a financial advisor?
Regardless of your needs the most important thing about picking an advisor is finding someone you are comfortable working with. If your doctor makes you feel uncomfortable, you would change doctors. Similarly, if your financial advisor is making you feel uneasy, you should change advisors. You need to be able to reveal all your financial issues, good and bad, to your advisor. If you can’t do this, find someone else you can trust.

Make sure your advisor has the education and licensing required to help you. An excellent certification is the Certified Financial Planner™ or CFP® designation. These planners have required education, experience, testing, and ongoing education to ensure they can provide the best service to their clients. However, referring back to my first point, certification is no substitution for trust. Make sure you are comfortable and you trust your advisor.

What about compensation? How are financial planners paid?
Ask questions about your advisor and their practice when you meet with her. It is very important you understand all the ways your planner is compensated. Your planner may get an hourly fee, a fee based on your assets, commissions from financial instruments she sells to you, or a combination of any of these. There is no “right” method for all situations. The compensation your planner gets should be fair to both you and the planner. How she receives compensation needs to be clearly explained to you. If you feel confused on this point, keep asking questions. If your questions do not get answered, find another planner.

Thank you, Robert, for this introduction to financial planning. I look forward to sharing more of Robert’s advice and insights in future posts.

About Robert Cooper: After 9 years at MBNA American in Camden and Belfast, Maine, Robert moved to Minnesota to join with his mother-in-law in the financial planning business. His family was looking to improve their quality of life by having a small business that better fit with the family activity and school schedule. Living in Faribault, MN with his wife, Amy Gragg and their daughter Amanda, Robert finds time to run, golf, and help manage Amanda’s busy summer schedule!

Robert now has over 15 years of experience in banking, finance, and financial planning. He enjoys working with entire families on their financial goals and has been especially successful working with small business owners and women in financial transitions. His education includes a Bachelor of Arts degree from Amherst College and a Master of Science degree from the University of Michigan as well as several programs specific to financial planning. Robert is licensed for securities in multiple states and specializes in full family Financial Planning.

Capital Management Associates
1803 Legacy Drive
Faribault, MN 55021
Phone (507) 334-7433
Fax (507) 334-7433

A Registered Broker/Dealer, Member FINRA and SIPC

An SEC Registered Investment Advisor

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete initial and ongoing certification requirements.