Identifying a Worthy Planner

First, a quick disclosure.  I express some strong opinions below and since I’ve designed my practice around many of them, they can also be interpreted as self serving. I only hope that their usefulness is self evident.

When searching for a worthy partner to help you navigate treacherous financial waters, you need to answer three questions.

  1. Are they trustworthy?
  2. Are they competent?
  3. Do they provide what you are looking for?

Are They Trustworthy?

Trust is built through three avenues: structural, due diligence and relationship.


While you are embarking on a deeply personal journey with your advisor, there is no reason to give them powers beyond what they need to support you.  This means

  • Using a qualified custodian — Provides independent account statements and puts strict controls on the advisor’s access to your accounts.  And don’t forget to open and look at those statements once in a while.
  • Not giving discretion — Yes, this means more work for both you and the advisor, but while 99% of the time this will entail a simple rubber stamp, 1% of the time it will bring forth something really important that you or the advisor wouldn’t have thought to consider otherwise.
  • Require advisor be a fiduciary — This means they have a legal obligation to look out for your best interests.
  • Require advisor be fee-only — While most planners have their client’s best interest at heart, it is always more difficult providing advice that hurts their own self interest. So it is in your interest to look for compensation systems that minimize an advisor’s conflicts. Look for planners whose fees are paid directly by clients and not by product sales. Furthermore, understand that assets under management fees bias the planner towards focusing on the investment part of planning and has inherent biases against choices like paying off a mortgage or buying a fixed annuity. Ideally, for planning services, fees should either be a project rate, an hourly rate or a retainer based on your financial complexity.

Due Diligence

No matter how much things are structured to avoid betrayal, there are always bad actors out there and performing due diligence is a necessary task.

  • Who will you be working with?
  • Look at the advisor’s U-4 and firm’s ADV to see whether they have had any disciplinary action taken against them.  You can find this information at the SEC’s Investment Advisor Search.
  • Look at the advisor’s ADV Part II (provided by advisor) to understand disclosed conflicts of interest.
  • Perform Google searches on the advisor’s and the firm’s names.
  • Check out more than one planner — The National Association of Personal Financial Planners (NAPFA) and the Garrett Planning Network are two good places to find additional candidates.
  • Are they making portfolio return promises or guarantees — Unless it is crystal clear to you how this promise will be kept, this is a big red flag and you should go elsewhere.


When first investigating a planner, structural and due diligence factors tend to take precedence.  But as time goes on the strength of the developing relationship will slowly take on greater importance.  Are you comfortable with the advisor?  Does the advisor consistently follow through and do what they said they would do?

Trust negative gut reactions.  From Malcolm Gladwell’s Blink we know that people have an incredible ability to process tremendous amounts of information subconsciously. And when it comes to a negative impression of someone, it can often be the more accurate one (although obviously not always). As they say, there are many fish in the sea. If you have an uneasy feeling about a planner, move on to the next one.

Are They Competent?

When looking for any kind of expert, you have a basic problem. How do you evaluate their competence?

Most people address this problem by asking for referrals from other professionals or their friends. And for products and services whose quality is quickly apparent, and the consequence of a bad choice are low, this works very well. For example, choosing a restaurant (e.g., expert chef), photographer or painter all fall into this category.

When the true quality of a product or service cannot be quickly assessed however, people base their evaluations on other areas that can be quickly assessed (e.g., communicates well, acts with integrity, etc). Unfortunately, this means they are left with certifications as the only validation of expertise.

For a doctor who has finished a bachelor degree, 4 years of medical school, a multi-year residency program in their specialty, passed a board exam and has met continuing education requirements, the certification may be sufficient. The Certified Financial Planning mark, on the other hand, only requires 6 courses (used to be 5) and passing a comprehensive exam and 3 years in the financial industry (in any capacity). Can you imagine trusting a heart surgeon with that little training?

If you couple this with the fact that the vast majority of financial planners have come into the field from a sales background you get a lot of financial planners who have only the most rudimentary understanding of their field, do not have extensive analytical skills, but have well honed skills in coming across in a personable and authentic way. Even worse, their sales background makes them unused to questioning their employer’s assertions.

So what can you do?

Look for expertise seeking behaviors

Unless you are an expert yourself, judging a person’s expertise directly is ineffective.  Instead, evaluate their methods for achieving and maintaining their expertise. Ask them how they acquired their expertise and how they keep it up to date. The standard answers include: years of experience, CFP® training, reading trade magazines, and attending investment company presentations, local FPA (Financial Planning Association) meetings, and an occasional conference. If you don’t get at least this much, start looking elsewhere. Even better answers include: the reading of academic journals, performing original research and presenting at conferences. Financial planning is a profession still in its infancy. Anyone who isn’t deeply questioning and analyzing the information that is being fire-hosed at them from Wall Street is doing their clients a disservice. A great financial planner will be trying to move the profession’s body of knowledge forward.

If a planner expresses too much certainty in their beliefs that is another bad sign. True experts have an appreciation for all they don’t know and are much more likely to hedge their statements. You are looking for evidence of an analytical and critically thinking mind that is not too set in its ways and is always looking to learn something new, but with very skeptical eyes towards all the information coming their way.

Ask for their knowledge boundaries

A good planner knows when they are out of their depth. Ask the planner under what circumstances or areas would they refer you to someone else. If they claim expertise in everything or in house access to expertise on everything look elsewhere. No one can do it all. For example, dealing with government pensions, expat living, business planning and real estate each offer complicated land mines that if not handled properly can cause large problems.

Ask for referrals

Ask for referrals to two or three other financial planners. A good planner should be willing to do this and also tell you how they each compare along with strengths and weaknesses of their practices. When you talk to these other planners, that will also provide further insight into the planner’s character and how he or she is seen in the community.

Pay attention to the types of questions the planner asks

For any good guide to do their job well, they need to truly understand their clients desires so they can help guide them to places they will value. This requires the planner to ask hard questions and to listen. Unless you are incredibly self aware, a good planner should ask questions that give you pause and make you think.

Do they ensure you understand their recommendations

You are the one who has to live with the consequences of your financial planner’s decisions. A good financial planner should be willing to spend the necessary time to ensure that you understand why they are making their recommendations. If it comes across as too complicated, and they can’t make it understandable to you, that is a sign to move on to a different planner.

Do They Provide What You are Looking For?

Here are some things you should consider.

Are you self-directed and just looking for a second opinion or some expertise to get you through a complicated choice.  Or, are you looking for a long-term partnership?

To be blunt, since most compensation in the financial industry is centered around collecting and managing people’s assets, investment management is the primary service offered by most advisors with other planning services tacked on as an after thought.  If you want more than that, make sure the advisor has a real focus on financial planning.

Financial planning services come in a spectrum of styles.  At the extremes, which I recommend avoiding, are the two most common planning styles offered: planner driven (solutions provided with minimal input from you) and client driven (planner mostly helps with execution not decision making).

In between these extremes the financial planning profession has been slowly growing two styles which attempt to balance the expertise of the planner with the wishes and desires of the client.  And while some planners touch both styles, they are typically strongest in one or the other.

  • Therapist style — Digs deep into your relationship with money, helping you identify and eliminate self sabotaging beliefs and behaviors.  This in turn allows you to be open to discovering your true hearts desire.
  • Technician/ coaching style — Provides you the controls, feedback and encouragement necessary to feel empowered and in control of your financial life.

Which style you prefer, depends on you.  An analogy exists with weight control. When trying to control their weight, some people need to discover the emotional component of their eating (therapist style).  Others, just need the tools to easily monitor their weight, calorie intake, exercise and the policies and encouragement on how to vary their meals and exercise regimen to keep them acceptable (technician/coaching style).

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