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Choosing a Financial Planner

When something happens that roil the markets, people start to pay attention to their investments and retirement accounts. The recent Brexit vote in Great Britain, for example, rattled the markets and people started asking, “what should I do?”

Sometimes the answer is, “nothing.” Sometimes it’s not.

When people ask me that question, I typically tell ask them, “Do you have a plan?” Many don’t.

If you have a financial plan, whether an investment plan or a retirement plan, reacting to market swings should be accounted for in the plan. Typically, this involves a mix of investment that doesn’t put too many eggs in a single financial basket.

Most people don’t have the time or experience to actively manage their money, so they work with a financial planner to help them. According to the Wall Street Journal, “Financial planners advise clients on how best to save, invest, and grow their money. They can help you tackle a specific financial goal—such as readying yourself to buy a house—or give you a macro view of your money and the interplay of your various assets. Some specialize in retirement or estate planning, while others consult on a range of financial matters.”

That’s a good summary of what financial planners do. Financial planners are not to be confused with stock brokers. A stock broker buys and sells securities on behalf of a client.  A financial planner is also different than an accountant who can prepare and sign tax returns.

That said, a good financial planner will have a keen understanding of stocks, bonds, mutual funds, and other exchange-based investments; as well as a good understand of tax saving strategies. All are important parts of a sound investment plan. A financial planner should also be aware of other investments, such as real estate and insurance, and how they fit into your overall portfolio and strategy.

As U.S. News and World Report says, “Choosing the right financial advisor is vitally important to your financial well-being. This is someone you will trust with your investments, which makes it a high-stakes decision.” Choosing a financial planner involves some tangible and intangible factors. Most experts recommend reviewing the qualifications and experience of planners, talking with existing clients. It is also important to find someone that you are comfortable working with and that understands and shares your values and goals.

One underrated quality to look for in a financial planner is humility. “Warren Buffet outperforms the market averages. There aren’t a lot of people like him,” says the Wall Street Journal.  “If you have an initial meeting with an adviser and you hear predictions of market-beating performance, get up and walk away. No one can safely make such guarantees, and anyone who’s trying may be taking risks that you don’t want to take.”

Such claims are meaningless until an advisor knows your investment goals, risk tolerance, family status and plans, retirement timeline, and a host of other financial and life goals. After all, money is not an end in itself. It helps us gain and keep what we value most.

The fact is that no one knows what the market will do in the short run. The past can give us guidance, a rearview mirror is a lot different than a crystal ball. A global financial event like Britain’s Brexit vote is a case in point.

What should you do? Be prepared. Have a plan.

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