Q: Why should I hire a financial planner to manage my money?

A: A financial planner will be able to connect all of the financial dots in order to provide you with an overall plan to meet your financial goals. He or she should have training and experience in all kinds of financial products and financial aspects of your life – equities, bonds, insurance, taxes, and estate planning – in order to make the right recommendations for your personal situation. A financial planner can also save you thousands of dollars in tax deductions and find higher-yielding investment products at little or no extra risk.

Q: How much does a financial planner cost?

A: The fees will vary depending on the education and experience level of the financial planner, and how the fees are assessed. In general, a financial planner will charge based on one of two ways: commission or fee-only. If the planner charges based on commission, the amount will usually be a percentage of each transaction or assets under management. If the compensation structure is fee-only, he or she will typically charge an hourly rate or will quote a specified fee for the services provided.

Q: Which certifications should my financial planner have?

A: There are a number of different financial planning certifications. While a financial planning professional can have any of several designations or certifications, at the very least you should make sure that he or she is licensed and in good standing with the licensing authority. Three of the most common designations are Certified Financial Planner, Chartered Financial Consultant, and Registered Investment Advisor.

A Certified Financial Planner (CFP) has competency and experience in all areas of financial planning. A CFP has completed courses of study in over 100 topics of financial management including equities, taxes, and retirement planning. He or she must also follow the Certified Financial Planner code of ethics. A CFP has a fiduciary responsibility.

A Chartered Financial Consultant (ChFC) also has extensive experience in helping individuals assess their financial goals. In order to obtain the ChFC certification, a candidate must complete the program and pass the tests administered by the American College.

A Registered Investment Advisor (RIA) doesn't need any special training or certification. However, a RIA must be registered with the security agency of the state in which he or she does business, and must also be registered with the Securities and Exchange Commission if assets under management exceed $25 million.

Q: How can I pick a good financial planner?

A: Choose a financial planner who has experience dealing with clients in similar circumstances to yours. You'll also want to make sure that the financial planner has your best interests in mind, and that he or she isn't selling you products that are not suited to your needs. Interview prospective financial planners and ask them about credentials, management strategies, and history of performance. Call up past clients as references.

Q: What is the difference between asset allocation and diversification?

A: Asset allocation refers to the diversity of your entire savings and investment portfolio across asset classes. Stocks, bonds, cash and real estate are asset classes. Diversification refers to the types of investments held within each class. For example, both 3M and Union Pacific are high-cap equities in the Industrials sector. Because they're in the same sector, these two stocks are likely to move up or down together. However, Tyson Foods is in the Consumer Staples sector. It is not likely to move in tandem with 3M or Union Pacific. Owning 3M and Tyson Foods provides diversification within the asset class of stocks. But that's not enough. A portfolio that invests in multiple types of assets, not just stocks, is also important.

Q: How should I vet financial advisors?

A: Your plan should be to interview several financial advisors to find one that meets your investment style, has a good track record of returns, is open about his or her fee structure, and discloses any conflicts of interest. During the interview process, ask questions that address these main points. Ask the advisor for references and follow up with them to make sure the advisor is trustworthy.

Q: How can I check out the background of a financial advisor?

A: If the advisor is a Certified Financial Planner, check the Certified Financial Planner Board of Standards. The Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), and the National Association of Securities Dealers (NASD) are also places to check and make sure the financial advisor has not had disciplinary action taken. Another great source of information is the advisor's past clients. A good advisor won't be afraid to hand out two or three solid references.

Q: Where can I find a financial advisor who has no ties to any companies who push for selling products?

A: A Certified Financial Planner has a fiduciary responsibility to put your needs and interests above his or her own. While a CFP may profit from a product that is recommended to you, it is unethical for a CFP to recommend a product that is not in your best interest. Hiring a strictly fee-based (as opposed to commission-based) advisor is also a good choice if you're concerned about the advisor pushing products.

Q: What are the best financial management companies?

A: The key to successful financial planning is finding an honest and knowledgeable financial advisor that has you interests at heart. Any financial management company can potentially employ such an advisor. It's great to side with a company that has a good track record of customer support, positive returns, and open fee structure, but don't focus on this too much. Focus on finding an excellent advisor above all else.

Q: What is involved in financial planning?

A: Financial planning looks at a person's overall financial picture. A financial planner will often ask a prospective client to fill out an extensive questionnaire in order to understand his or her financial needs and goals. The planner will usually put together a detailed, short-term 5-year plan designed to improve the client's overall financial position. That may be followed by a long-term plan, along with suggestions about how to save and invest for retirement and a child's college education at the same time. The planner will also look at ways to reduce current and future tax liabilities and protect assets by having the proper life, health, disability and long-term care insurance coverage in place. Finally, he or she may offer suggestions on estate planning.

Q: What is a time horizon?

A: Time horizon refers to the amount of time a person has to save for a particular event. For example, the time horizon for a college savings account might be 10 years for the parents of an eight-year old child, but 15 years for the parents of a three-year old. Likewise, the time horizon for a 30-year old saving for retirement might be 35 years, whereas it might be 15 years for a 60-year old who started saving late in life.

Q: What's the difference between financial planning and retirement planning?

A: Financial planning covers all aspects of a person's financial well-being. This includes savings, investments, retirement and college savings plans, insurance coverage, and estate planning. Retirement planning covers only investments made for retirement.

Q: How are financial planners paid?

A: Financial planners are paid on either a commission or fee basis, or sometimes a combination of the two. Commissions are usually one-time charges based on each product sold or for each transaction. Fees can be based on the percentage of assets under management, an hourly rate, or even a flat fee.

Q: What questions should I ask a financial planner?

A: First, ask about his or her experience with people in a similar situation to yours. Second, ask about education and certifications. Third, ask about the breadth and depth of products offered. Fourth, ask how he or she is compensated for services. Finally, always be sure to check that the financial planner is fully licensed and in good standing. If the financial planner is a CFP, visit the Certified Financial Planner Board of Standards website to run a quick check.

Q: How often should I see my financial planner?

A: While your financial planner may make a different recommendation based on your particular circumstances, it's a good idea to see him or her once a year. You should also consider making an appointment in anticipation of life-changing events such as marriage, the birth of a child, divorce, or after inheriting a large amount of money.

Q: What is fiduciary responsibility and why is it important?

A: Fiduciary means to hold a confidence or trust. A financial services industry professional who has a fiduciary responsibility to his or her clients must put a client's needs and interests ahead of his or her own. Certified Financial Planners have a fiduciary responsibility to their clients. While stockbrokers and insurance agents are regulated and licensed, they do not have a fiduciary responsibility to their clients. The recommendations they make must only meet the "suitability standard." In other words, the risk level of the product must be suitable for the client based on income, assets, risk tolerance or another standard that is specified in the prospectus. Advisors with a fiduciary responsibility are less likely to push products that earn them a quick buck.