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5 Steps To Hiring The Right Financial Planner

Last week we talked about how to decide whether you should bring in a financial planner to help you make the best decisions about your financial future.

Once you’ve decided you want to pursue hiring a financial planner, what’s next? Today we’re breaking down the process of hiring a financial planner into just five simple steps.

Before we dive in though, let’s review the differences between a financial planner (or advisor) and a broker, as well as the different obligations they have when it comes to making decisions about your investments.

Fiduciary Responsibility vs. Suitability

A financial planner is a professional you hire to choose your stocks, bonds, real estate investment trusts, and more. These planners are fiduciaries, meaning they’re legally obligated to act in your best interest. Normally you’ll pay your financial planner a flat fee or or he’ll take about 1% of the assets under management (we’ll discuss this in more detail below). This means these financial planners often have fewer conflicts of interest than brokers.

Meanwhile, a broker works for an investment firm. Her job it is to persuade clients to buy or sell stocks, bonds, mutual funds, and other financial products. Paid on commission, brokers have an incentive to sell. The broker’s standard is suitability, meaning he or she isn’t a fiduciary. While a specific investment is appropriate for you as a client, it might not be conflict-free.

If you’ve decided hiring a financial planner is most compatible with your goals, follow these 5 steps to find the best one for you.

1. Get Referrals

What could be better than getting referrals from friends, family and the trusted professionals in your life? If possible, try asking contacts with similar income/asset levels for referrals to make sure the financial planner will be comfortable with your situation.

You should interview at least three candidates, preferably at their offices. This will give you a good comparison of the candidates, their office staff and size as well as their business practices.

2. What Type Of Advisor Do You Want?

Are you looking for an investment manager or a long-range financial planner? A investment manager or broker will be solely focused on your portfolio, where as a long-range financial planner will help you create a more comprehensive financial plan. This might include considerations like insurance, retirement, and college tuition.

3. Look For CFPs & RIAs

Did you know that anyone can call herself a financial planner? Other designations like Certified Financial Planner (CFP) is the highest standard in the field. CFPs complete coursework, pass regular exams, and uphold a code of ethics along the way.

Your CFP should also be a registered investment advisor (RIA) because they must register with either the Securities and Exchange Commission (SEC) or state securities authorities. Keep in mind that RIAs have a fiduciary duty to their clients.

4. Do Your Due Diligence

When hiring a financial planner, checking references, credentials, accreditations and business practices is one of your most important steps. Ask each potential advisor for at least three references of clients with a similar financial profile to yours – and call them!

Ask for a copy of the Form ADV – this will disclose possible conflicts arising from securities trades and answers a lot of other questions. Also request a risk-adjusted performance record (in writing) going back at least five years.

Be sure to ask which custodian would hold your money. It should be an independent company and be well-known.

5. Get Clear On Compensation

A fee-only method is the most commonly-recommended way to pay a financial planner. Your financial planner is paid either a flat rate, an hourly rate, or a percentage of your assets, meaning your financial planner’s success ebbs and flows along with yours.

Another compensation option is to pay your financial planner by commission only. The financial planner takes a commission of every product they sell (stocks, annuities, insurance, and more). It doesn’t matter how well your investments do – they still get paid.

You might also consider a fee-based arrangement, which is a combination of the fee only and compensation methods.

And while you’re on the topic of compensation with your potential financial planner, don’t forget to ask if there are any hidden fees that haven’t been discussed yet!

A Financial Planner Can Provide Peace Of Mind

Now might be the perfect time in your life to bring in proven, professional expertise to map out all aspects of your financial future, taking a huge burden off of you. Follow these five steps to get you started, and remember that peace of mind is always worth investing in!

*Disclaimer: Citywide Home Loans does not provide financial planning services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.

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Do You Need A Financial Advisor?

When it comes to your retirement, college savings, or your investment goals, there’s a lot to know and understand. Many people bring in a financial advisor to help them get educated, strategize, and make thoughtful decisions about their financial future.

Have you considered bringing on a financial advisor? Here are 5 ways to determine whether it might be the perfect move for you.

5 Reasons To Consider Hiring A Financial Advisor

1. You Admit It: You Just Don’t Want To Deal With Money

Many people simply find it stressful or even a bit boring to manage their own money. Why not get a pro financial advisor to handle all of this this for you? To make this happen though, you’ll need enough investable assets (anywhere from $50,000 to $1 million or so) to make it worth it for a financial advisor taking you on. If you have less than the required amount invested, your best bet is to place your money in low-cost index funds.

2. You’re Nearing (Or In) Retirement

There is a lot to consider when you’re getting ready to retire, and a financial advisor can offer you a third-party opinion. Are you financially ready to retire? Should you file for Social Security, and when? How should you withdraw from your retirement accounts to meet your needs and make sure your money lasts?

Most people can benefit from at least a one-time meeting with a financial advisor when they reach this stage of life.

3. You’re Getting Married Or Starting A Family

Joint finances. The costs of having kids. Life insurance. Estate planning. Saving for college. These are just a few of the financial concerns that come into your life if you’re getting married or having children.

A talented financial advisor will help you strategize and prioritize all of these new responsibilities to create a secure and enjoyable life – now and in the future.

4. You’re A High Earner/Have A High Net Worth

As a high-income earner, it’s possible to save plenty of money but still not take full advantage of the many available tax breaks. From organizing large balances across several types of accounts, to advanced estate and tax planning strategies, it takes a lot of know-how to efficiently manage a large amount of money.

A good financial advisor helps you make those decisions and recommends tax-savings strategies while also overseeing some of the implementation and management responsibilities for you.

5. You’re Self-Employed

As a self-employed person, you might have a different set of financial concerns as well as opportunities. You’ve likely got several different retirement accounts to choose from, an unpredictable income, employees to think about, and plenty of questions about your business structure – just to name a few!

A financial advisor (particularly one who often works with the self-employed) can help you build a more successful business and hold onto more of your money.

Who Doesn’t Need a Financial Advisor?

Financial advisors are an incredible resource, but there are still many instances in which you should hold off on hiring one.

1. You’re Working With A Limited Budget

It can be tough to fit the cost of a financial advisor into a budget that’s already tight. Plus, there’s not always much a financial advisor can implement without extra money available. In the meantime, however, you might find a financial advisor to consult with you on a one-time basis for a reasonable fee to help you get a handle on your priorities.

2. You Need To Pay Off Consumer Debt

If paying off your credit card debt or other debt is front and center in your financial life, it’s often better to consult with a qualified credit counselor instead of a financial advisor.

3. Your Financial Situation Is Straightforward

Most financial advice is actually fairly simple! If your own situation is straightforward but you love getting educated about personal finance, there’s never been a better time to jump in and do it yourself. Take advantage of all the information and the quality tools at your fingertips!

Now that we’ve gone over how you can be sure you need a financial advisor, how exactly do you find and hire a good one? Next week we’ll be sharing tips and tricks for connecting with the perfect financial advisor for you!

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5 Steps To Hiring The Right Financial Planner

*Disclaimer: Citywide Home Loans does not provide financial planning services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.

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Should You Save Or Shred Financial Documents?

As you go through your financial documents during this tax season, you may find yourself wondering how long you should keep these documents. You probably know that certain documents like tax returns, bank statements, etc. need to be kept, but for how long and in what format?

This article will help you determine which financial documents to keep and the right time to discard the ones you should toss. Once you’ve identified the keepers, we’ll help you with the best way to safely store all that personal information.

How Long To Keep Financial Documents?

1. Documents To Keep Up To Three Months
Monthly utility statements, purchase receipts, credit card statements, deposit and withdrawal slips fall under this category. Unless you are self-employed and you need to keep business related documents or receipts for tax purposes, you can dispose of them as soon as you verify your payment was processed, or check them against any physical receipts or bank records that record your purchases.

If you’ve purchased something that applies to a warranty or tax claim, then keep those receipts with the warranties or taxes.

2. Documents To Keep For A Year
Keep a paper or digital copy of the past years’ worth of your monthly bank statements and cancelled checks. Additionally, hold on to your pay stubs to verify the accuracy of your Form W-2 when tax season arrives.

3. Keep Tax Documents For 3 – 7 Years
The IRS recommends keeping tax documents for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. If you file a claim for a loss from from worthless securities or bad debt deduction, you should keep those records for 7 years.

Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out. Specific records that the IRS recommends you keep for tax purposes include bills, credit card and other receipts, invoices, mileage logs checks and other proof of payment and any other documentation that supports deductions or credits you claim on your return.

4. Financial Documents To Keep Permanently
Financial documents you should never get rid of are usually official papers from government agencies, involve lawyers, will be important to your family if you pass away, are related to something of significant value (like a jewelry appraisal), or are a pain to replace.

  • Alimony, Custody or Prenuptial Agreements
  • Birth and death certificates
  • Divorce Decree
  • House deeds and mortgage documents
  • ID cards and passports
  • Life insurance policy
  • Loan documents
  • Marriage license
  • Military discharge papers
  • Pension plan documents
  • Social security cards
  • Vehicle titles
  • Wills, living wills, trusts and powers of attorney

Additionally, you may want to consider permanently keeping:

  • Cancelled checks for major home improvements and maintenance (for the length of home ownership)
  • Medical records
  • Photos or video tapes of valuables
  • Tax return copies and worksheets
  • Income tax payment checks
  • Annual IRA or other investment contribution statements

Storing Your Financial Documents

1. Safe-Deposit Box
Use a safe deposit box for financial documents that are not easily replaced. These include lifetime documents such as birth & death certificates, passports, social security cards, vehicle titles, marriage license and divorces decrees.

Additionally, keep military discharge information, life-insurance documents, loan documents and, in case you need to make an insurance claim, an inventory or your home’s contents.

2. Fireproof Safe Or Password Protected Electronic File
Use a safe or electronic files for other financial documents such as bank and investment statements, pay stubs, tax documents, pay stubs, insurance policies, etc.

To keep electronic documents safe, be sure to use complex passwords – according to Lifehacker getting your computer to make and remember your passwords for you may be the best choice.

Properly Dispose Of Unneeded Documents

When it’s time to discard your receipts, credit card statements or other financial documents containing your personal information, be sure use a shredder. Cross-cut and confetti-cut shredders offer better security than a strip-cut shredder because they can tear your paper into countless pieces.

*Disclaimer: Citywide Home Loans does not provide financial planning services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.

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How To Find The Perfect Accountant

Did you know about one third of us hire a tax accountant or other tax professional to file our tax returns? And yet, it turns out most of us don’t know much about what we should be looking for when we hire them.

80% of people who use a tax accountant or other tax pro never ask them about their credentials at all! That’s pretty surprising, especially since you’ll be sharing everything with them from your income to your bank accounts, to your Social Security number and more.

Do You Need An Accountant At All?

When you’re thinking through the process of finding the right tax accountant for you, it helps to consider what you’ll need the accountant to do for you.

To get you started, here are some common reasons you might need an accountant:

  • To ensure the accuracy of your tax returns.
  • To save time (not to mention stress).
  • You’ve got a complex tax situation on your hands and you need specialized advice – for this year and for the future, too. Maybe you’ve started a business, invested in the stock market, purchased rental property, moved outside the U.S, or had something else come up that’s making tax time a bit more complicated.
  • You know you need to file back taxes, pay off a tax debt, or maybe you’re being audited.

Which Type Of Tax Pro Should You Hire?

Certified public accountants (CPAs) have passed the CPA exam, are licensed by the state, and often specialize in one area of accounting. A CPA can represent you before the IRS in the event of audit or collections. Keep in mind not all CPAs handle tax issues.

Enrolled agents (EAs) have also passed thorough testing and IRS background checks. EAs can be ideal for complex tax situations since they often specialize their practices. They can also serve as your representative before the IRS for an audit or collections issues.

Tax attorneys are lawyers specializing in tax law usually with a master of laws degree in taxation (an LL.M.) in addition to a juris doctor (J.D.) degree. Attorneys are great for complex legal matters like preparing estate tax returns or an appearance before the U.S. Tax Court, for example.

How To Find An Accountant

Regardless of who you decide to hire, you’ll want an accountant who has handled tax situations similar to your own.

Referrals are your best bet, and it’s especially helpful to ask someone who has a tax situation that’s similar to your own. Other great sources of referrals include family, friends, business owners, financial advisors and attorneys.

Watch out for any accountants who guarantee large refunds or make other promises that quite don’t add up.

Do you have a straightforward tax return? Retail tax franchises like H&R Block, Jackson Hewitt and Liberty Tax Service might be a great fit. Ask if you can meet with a CPA, an EA, or other senior tax preparer. You’ll usually pay the same price, but you’ll work with a more seasoned tax pro.

Interviewing Your Accountant: A Checklist

Accountants and other tax professionals are required to follow federal and state regulations. But there are still several questions you can ask to help you you find someone who is both experienced and reliable.

Be sure to ask your prospective tax accountant:

  • How long have you been in the tax preparation business?
  • What licenses or other designations do you have?
  • Do you specialize in any particular tax issues?
  • What are your fees?
  • How long will it take you to finish my taxes?
  • Do you outsource any work or take care of it all yourself?
  • Do you have a privacy policy? Will you be sharing my tax information with anyone else?

If all goes well during the interview, you’ll want to contact your state’s board of accountancy to check the status of the tax professional’s license and find out if there are any disciplinary issues. You can also ask the IRS Office of Professional Responsibility if an EA has been subject to disciplinary action.

Feel Confident About Your Decision

Remember that when it comes to choosing your accountant or other tax professional, never settle for someone who doesn’t make you feel completely comfortable. Keep searching if you need to! Tax season can feel stressful, but having the the right accountant in your corner can help you feel much more relaxed.

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*Disclaimer: Citywide Home Loans does not accounting services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.

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Create Your Financial Plan In 10 Steps

A financial plan can cover a variety of money topics. These include budgeting, expenses, debt, saving, retirement and insurance, just to name a few. When you understand how each of these pieces work together, you’re laying the groundwork for a solid financial foundation for you and your loved ones.

Today we’re walking you through how to tackle your financial plan in 10 steps. Ready to begin?

1. Define Your Financial Goals

Time to get specific! When you decide what you need your finances to do for you, it’s easier to tap into strategies to make it happen. Establish goals, then create a plan for how you’ll get there.

Here are some questions to get you started with the goals for your financial plan:

  • Do you want to contribute to your kids’ college education?
  • What’s your ideal retirement age?
  • Is getting out of debt a priority for you?

You might even work with a financial planning professional to help you zero in on the most realistic goals. (Watch for our upcoming article on choosing a financial planner!)

2. Set Up Your Budget

If the word “budget” stirs up a little bit of dread for you, you’re certainly not alone – but you can’t skip this step when it comes to your financial plan! A budget is hugely important tool that helps you see exactly how much money you spend, and contrasts it with the amount of income you earn.

Being in control of your spending means noticing where you’re spending too much money and where you might be able to make some cuts and redirect your cash flow to better serve your goals.

Begin by identifying necessary expenses – your house payment, debt payments, insurance payments, and taxes. Next, make note of important expenses that you’re still able to modify to a large degree. For most people this includes groceries, utilities, and work-related expenses.

Finally, decide which of your expenses are completely optional and can be virtually eliminated. This includes expenses like entertainment and vacations.

3. Cut Expenses And Redirect The Flow Of Your Money

Once you’ve organized your expenses into necessary, important, or optional, you may find that you need  to make reductions or cut some expenses altogether.

For example, you can reduce your grocery expenses by shopping sales and cutting coupons and opt for a family staycation this year.

Making these kinds of cuts frees up your cash flow – you can now direct more of your money into paying off your debt or your emergency and retirement savings.

4. Create An Emergency Fund

Next up? Setting up your emergency fund – a savings account or money market that holds your liquid cash. You’ll want to have enough to cover 3-6 months’ worth of expenses available when an unexpected expense hits or your income takes a sudden hit. When you can avoid borrowing money to float yourself through tough financial times, your emergency fund will more than pay for itself.

5. Pay Off Your Debt

Once your emergency fund is full, the next step in your your financial plan will be to redirect funds to pay off debt.

There are several different ways to get out of debt, but Dave Ramsey’s debt snowball approach is a great fit for many different financial planning situations.

To begin, concentrate on paying off your smallest debt. Then target the next smallest debt, and so on. As you move onto paying off larger and larger debts, you’ll feel a sense of victory each time you retire another one. You’ll get to eliminate a monthly payment with each debt you pay off – and that means you’ll increase your cash flow, which can be put towards the next-largest debt. And psychologically, there’s something very satisfying about reducing the number of debts you have.

6. Contribute To Your Retirement Savings

We hope you’re already stashing away some funds each month for your retirement. As you get out of debt your cash flow will increase and you’ll be able to save more money for retirement – and for all your other goals, for that matter.

If you haven’t started saving for retirement, today is the perfect day to begin. Start by contributing an amount that doesn’t significantly hurt your cash flow each month. Then, as your income increases, increase your contribution amounts.

7. Save For Your Other Goals

Between the worlds of emergency funds and retirement funds is the strategy of saving up for your near-future goals. This might include saving for your kids’ college educations, a new car, repairs or renovations to your home, and more. Saving up for these intermediate goals lets you have money available (without borrowing) for those large-yet-predictable expenses.

8. Protect Your Financial Assets With Insurance

Insurance is vital when a situation pops up that you couldn’t possible save enough money to cover.

If you’re like most people, you’ll need:

It’s easy to forget that insurance protects your financial assets and saves you from draining other financial resources – making it a key part of a smart financial plan.

9. Set Up Your Will

The last piece of your financial plan should be to make arrangements for what happens to your estate after you’re gone.

If you don’t set up a will, at the very least your surviving family members will end up in probate court, working out the distribution of your assets.

Meet with a trusted attorney and set up a will that distributes your estate as you wish. It if feels overwhelming, remember you can always make modifications as your financial details evolve. You might find you feel a certain sense of peace upon completing a will, knowing you’ve done the best they can to take care of the ones they love.

10. Implement Your Financial Plan!

As you tackle these 10 steps that guide you through the basics of your financial plan, keep in mind that wealth building is a marathon, not a sprint. Implement them slowly and plan carefully. The tortoise always wins the race!

*Disclaimer: Citywide Home Loans does not provide financial planning services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.

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