| Financial planners: not just for
millionaires anymore |
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Fee-only or commission?
Katz serves on the board of directors for the National
Association of Personal Financial Advisors, an organization
of more than 1,300 fee-only financial planners. He recommends starting
your search at the NAPFA Web site for fee-only
CFPs in your area.
"Starting with a CFP means a lot. It means
they have gone the extra step of education and training," he
says. "And I would go one step further and, because of the
potential for conflicts of interest, I think you should find somebody
who is a true fee-only financial planner."
Kerry Hannon, author of "Suddenly Single: Money
Skills for Divorcees and Widows," agrees.
"I'm a big fan of fee-only financial planners.
They don't make commissions off of what they suggest to you. You
know what their flat fee is up front before you go into a meeting."
Detweiler says it's more a matter of personal
taste.
"There are good planners in both camps,"
she says. "One is not necessarily better than the other, but
one may work better for you."
The experts agree that fees and commissions
vary widely in the largely unregulated world of financial planning.
Peggy Cabaniss, chair of the NAPFA, estimates that financial planners
can charge $125 to $350 per hour, depending on their expertise and
experience, or, if they charge commission, ask for .5 to 1.25 percent
of the assets they are managing. They can also charge on a per-project
basis or set a flat fee for comprehensive financial plans. The latter
can cost $2,000 to $5,000.
Finding a financial fit
Ready to search? First ask family, friends and business associates
for recommendations. Then visit the Web sites of NAPFA, the Financial
Planning Association (formerly the Institute of Certified Financial
Planners and the International Association for Financial Planning)
and the Certified
Financial Planner Board of Standards for members in your area.
Then narrow your list to less than 10 candidates.
Next, call each planner's office and find out
if they work with clients at your financial level; some have minimums
and may require that you have $100,000 or more to invest.
Finally, set up a minimum of three initial meetings.
Most planners do not charge for this. It's an opportunity to ask
your 10
key questions and determine if you've got the chemistry and
communication to work together.
What can you do for me?
There are no guarantees that a planner will, say, double your money.
Should a planner offer you such promises, head for the door immediately.
What they can and should offer to do for you
is:
- Assess your current financial situation by
reviewing your last two tax returns, all income sources, liquid
and illiquid assets, wills, insurance policies, and estate and
retirement planning documents;
- Identify your financial needs and goals;
- Develop a financial plan;
- Explain the pros and cons of various options
and financial instruments (stocks, bonds, mutual funds, IRAs,
etc.);
- Advise you in identifying other professionals
(investment brokers, lawyers, accountants) to execute your plan;
and
- Review your progress periodically to make
sure your plan remains on track.
Advice and education is what makes the right
financial adviser worth the investment, says Katz. Neither your
banker nor your accountant has the broad training necessary for
sound cradle-to-grave financial planning.
"Getting an understanding and education
as far as inflows and outflows, assets and liabilities and what
the future holds, that's a great investment," he says. "Yes,
$2,500 is a lot of money. But if you amortize that over the benefit
you're going to receive through financial planning, it's really
a drop in the bucket."
Detweiler says doing your financial homework
is crucial to getting the most from your planner.
"I'm a big fan of doing a lot yourself,
because the more you empower yourself, the better your decisions
will be, regardless of whether you have a planner," she says.
"It's intimidating, no doubt about it. But the basic steps
are pretty simple: figure out what your goals are, what you need
to achieve them, and just get started."
Jay MacDonald is a contributing
editor based in Mississippi.
Editorial assistant
Leslie Hunt contributed to this story.
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