"The frustration I hear from people seeking a planner is that most want to generate at least $2,000 per year from the engagement," says Garrett. "It's true that most planners want to have a recurring relationship and revenue stream with the client."
But some planners will provide a basic financial check-up for less than $1,000. "That would allow you to get a plan drafted that you can go off and execute yourself," says Roger Wohlner, a Chicago-area fee-only planner. "So at least you can get a plan laid out for you and go execute it for a few years. Then go back for a check-up."
3. Make a short list
Start by assembling a list of five or six possible candidates. The best ways to generate names include:
4. Winnow it down
Once you've generated a short list, get in touch with each candidate, notifying them that you're considering interviewing them using their services, and asking them to complete a short questionnaire that will help you narrow your list. Morningstar has developed a downloadable questionnaire
adapted from Sheryl Garrett's Personal Finance Workbook for Dummies
"If a week or two passes and you've only received a couple of questionnaires back, or if one is very sparsely completed or a bit curt, that tells you the planner isn't really interested in going through this process with you. That can help you narrow down the list and save everyone some time. On the other hand, you may have written to someone who is a very busy professional."
Garrett recommends following up with in-person interviews with at least two finalists.
"You should come into the interview with an idea of what you are looking for. Be very upfront--'This is what I want; this is what I need.' That may turn off some advisors, and that's fine. It's your money, so find someone who matches up well with what you need."
Garrett also advises paying close attention to the prospective advisor's style of communication and overall approach to working with clients. "Are they asking thoughtful, provocative questions? Or are they just interested in finding out how many dollars you have to invest? If you hear drooling on the other end of the phone, hang up."
5. Check references
Checking an advisor's references is important--but it's best to get past the usual approach of talking with existing clients. After all, that strategy didn't do much for the victims of Bernie Madoff.
Instead of client references, Garrett suggests doing character references. Ask for a reference to professionals who know the advisor's work and are in a position to make an endorsement. "It could be a CPA, an attorney, or an elder-care specialist. You want references from the people the advisor has worked with," she says.
You can also run a due diligence check on your finalists to see if they've been subject to any professional disciplinary action or other potentially disqualifying problems. The following websites will allow you to find information on specific financial advisors:
6. Make the hire, prepare for hard work
- U.S. Securities and Exchange Commission. The SEC maintains an online database that contains information about most brokers, their representatives, and the firms for which they work. Learn whether brokers are properly licensed in your state and if they have had run-ins with regulators or received serious complaints from investors. The site also describes advisors' educational backgrounds and employment histories.
- The Certified Financial Planner Board of Standards. The CFP Board database allows you to confirm that a planner is authorized to use the CFP designation and whether a planner has been publicly disciplined by the CFP board.
- FINRA Broker Check. The Financial Industry Regulatory Authority broker checker website offers a tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers.
- Brightscope Advisor Pages aims to provide a one-stop shop for transparency, including disciplinary information.
I hired a fee-only planner two years ago and can attest that it's not the last step. Instead, it's the start of a process that will involve considerable exchange of financial records, discussion, and planning. But I can attest that when it's done, you'll feel good about having a retirement roadmap in hand. If you're among that 80% of nonplanners, consider revising your resolutions for the year ahead.
Mark Miller is a retirement columnist and author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work and Living. The views expressed in this article do not necessarily reflect the views of Morningstar.com