Most people like to keep on top of their money. However, it's not always a good sign when your financial planner calls too often. It could mean you're actually working with a thinly veiled salesperson, that your planner doesn't have much experience, or worse.

To avoid these problems, it's important to understand what financial planners do, how they make their money, and what you should expect from a good planner.

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Financial Planner - An Unregulated Term
The term financial planner can actually refer to a variety of financial professionals. There are some financial planners who will simply help you develop a financial system for reaching your financial goals. Others will help you invest your money, or even actively manage your money on your behalf. Finally, there are some financial planners who provide a comprehensive set of services, including financial planning, investment management, estate planning, wealth management and other services.

In addition to understanding what services a financial planner offers, it's also important to research the credentials of prospective financial planners. Many people may be surprised to learn that it does not take any financial education or investment experience in order to call oneself a financial planner. A true financial expert will have completed extensive coursework, have years of financial experience and will most likely possess relevant professional certifications. (For more, check out our Certified Financial Planner Exam Info Page.)

How Financial Planners are Compensated
Financial planners make money in two main ways. First, many planners operate under a commission model, where they make a sales commission when you buy investments. Other planners operate under a fee-only model where they charge a fixed price for their services. The fee-only model should not be confused with the fee-based model, which means that planners collect both fees and commissions.

Most financial experts criticize the commission model because it presents a conflict of interest for the financial planner. Commissioned planners have an incentive to steer you toward investment choices that pay higher commissions. They also have an incentive to buy and sell frequently in your account to increase the commissions they make. Even if your planner is honest, it can be hard to trust their advice.

The fee-only model is preferable in many ways because the planners' advice is not biased by their compensation scheme. The fee-only model means that you often pay a larger cost upfront which may make financial planning services seem less affordable for small investors. However, the hidden costs of commissions are often far more expensive over the long run. (Learn more, see Paying Your Investment Advisor - Fees Or Commissions?)

What to Expect from Your Financial Planner
A planner should spend a lot of time with you up front, getting to know your total financial situation, understanding your goals, and assessing your risk tolerance and investment preferences. They should walk you through a long-term financial plan for the areas where you need advice, and outline the major steps along the way. Finally, they should commit to review the plan with you on a periodic basis, usually at least once per year, but more often if your needs change more frequently.

Why Not Getting Called is Good
You should not expect (or want) your financial planner to call you each time the market is down. An experienced planner will have seen plenty of bear markets and has the composure to ride out the tough times and help you follow through on your financial plan. While you may think that you want your planner to keep you in the loop, there are at least three reasons why you don't want your financial planner to contact you too frequently:

1. Good investing is like a chess match. A long-term financial strategy is played out slowly as a series of careful moves made through extensive planning. If your planner is calling because he or she is frequently surprised and is constantly changing strategies, it's a sign your planner may be inexperienced.

2. Frequent calls asking you to change your investments may indicate that your financial planner is more salesperson than financial expert. Buying and selling frequently may work for hedge funds, but it is almost always a bad deal for retail investors. It wracks up high transaction fees and can bring a big tax bill each April. Both of these factors drag like an anchor on your investment returns.

3. Most financial planners have many clients and not enough time to call all of them, so no news is often good news – your money is likely doing pretty well. If your financial planner is contacting you outside of the occasionally check-in call, it may be because something has gone awry with your money.

The Bottom Line
It's only natural to be concerned about your money, and your financial planner should check in every few months to ensure you are still on track. Some people prefer to know exactly what their money is doing every day, but in many cases, not receiving a call each week from your planner can actually be a good thing. (For more tips, check out Find The Right Financial Advisor.)

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