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Getting professional help

By Barbara Whelehan ·
Friday, December 17, 2010
Posted: 11 am ET

It's that time of year when we pause to reflect on the events of the past 12 months, and look to the promise of a new year with hope. Are you all set to make some New Year's resolutions pertaining to your finances, and in particular, your retirement savings?

A survey released this week by Fidelity Investments shows that 42 percent of Americans are considering making financial New Year's resolutions, with half (51 percent) citing the desire to save more money near the top of the list. Of those, many (59 percent) rank retirement planning and college savings as top priorities.

The Financial Planning Association recently sent out a press release offering 14 suggestions for money resolutions. I can't repeat them all here due to space constraints, but the first is to put your most important goals on paper. Its rationale: "Putting goals in writing gives them formality and a starting point for the planning you must do."

Two decades ago, when I was an editor for an inflight magazine, I would routinely receive unsolicited manuscripts from a financial planner about the importance of hiring a financial planner. At the time, I would toss the manuscript aside, dismissing it as a thinly disguised attempt at self-promotion. But she was definitely targeting the right market -- the affluent.

Truth is, the financial planning community would rather not work with those who struggle financially. When I was in my 20s and my finances were a shamble, I walked into the office of a financial adviser, told him my plight and asked if he could help me. "No," he said. "Sorry." The meeting was over and I walked away feeling empty.

Dealing with the riff raff

While everyone could benefit from a financial plan, the peddlers of advice would rather work with a wealthy clientele. Obviously, they have more money to work with and to pay for professional advice.

The current issue of the Journal of Financial Planning features a column about how to build a new model for the middle market. It attempts to find solutions for planners to address the nearly 15 million people ranging in age from 55 to 74 who have relatively modest incomes and limited financial assets. For example, incomes range from $18,000 for single females at the low end to $188,000 for married couples at the high end. Not including home equity, the median net worth ranges from $125,000 to $348,000, depending on household type, according to a study by the Society of Actuaries.

Planners often take a percentage point of financial assets as annual payment for services. So if someone has a mere $125,000 to invest, that would result in payment of $1,250 -- or "bupkis," as fellow blogger Jennie Phipps often says.

The authors of the article suggest several cost-effective measures to help the middle masses, such as using the services of a paraplanner to assemble data, much like a nurse takes vitals before a doctor sees a patient. This would "reduce the time and cost of providing services and solutions for mid-market clients."

Another solution is for the industry to develop software products that can manage risks and income needs. "'Off the rack' strategies that require only minor tailoring will allow the financial planning industry to help more people at a lower price point and higher profit margin," the authors say.

It's a problem that financial planners will have to work out, since they can't afford to do pro bono work for people who haven't accumulated a lot of money. In the meantime, the middle mass market will either have to pay for these services on an hourly basis or some other way if they want individualized attention.

Or they can use the cookie-cutter solutions ubiquitous on the websites of investment management firms that are all too happy to serve anyone who's interested in amassing wealth.

Share your New Year's resolutions ...


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