It's not always easy to take a dispassionate view of your own financial situation and decide on the proper mix of insurance, investments and the like. A good stockbroker can help. But if you'd like someone to make broader-based investment recommendations based on extensive knowledge of your financial situation, you may be in the market for a financial planner.
Candidates aren't hard to find; just look in your local Yellow Pages. You can also get names of planners in your area from the professional membership organizations listed below. After you have the names, select at least three candidates. Visit the office of each and ask for a detailed statement of fees and services, a résumé and references. Your purpose is to compare them on the following points:
Your planner should have, at the very minimum, a few years of experience in planning or similar fields such as accounting, securities analysis or trading, or law.
These titles do provide some assurance that the planner took the trouble to take the courses to raise his or her level of skill and knowledge in the field.
No one person, however well trained, has the encyclopedic knowledge required to deal in depth with all the problems that can affect an individual's financial affairs. Instead, a planner should be able to demonstrate that he or she consults regularly with experts in a variety of fields.
There is no standard fee system or scale in the planning business. Some planners work only for fees, much like lawyers. Others operate entirely or almost entirely on commissions. In between are the larger number, who depend on a combination of fees and commissions. In some cases the planner might partly credit commissions against the fee to encourage the client to buy insurance or other financial products through the planner's company. A planner who feels confident of being able to sell a high-commission product may offer a low fee.
Unless you're dealing with a fee-only firm, you can expect to get suggestions that you purchase an investment or insurance product that the planner sells. There's nothing wrong with that, provided the product is suitable for someone in your financial situation and compares favorably with the scores of others you might buy elsewhere.
However, you'd want to think twice about buying a load mutual fund (which charges a fee upfront) when there are so many no-load funds available, for instance. And why buy the stocks recommended by the planner at a standard commission rate when you can use a discount broker? It's up to you to decide whether the quality of the planner's service is worth the cost.
For a directory of fee-only practitioners, contact the National Association of Personal Financial Advisors at www.napfa.org.
The Financial Planning Association has a registry service you can use to get names of members in your area. Visit its Web site at www.fpanet.org, where you can do an online search. The site also features consumer information related to financial planning.
For names of CPAs who have earned the credential of Personal Financial Specialist (PFS), contact the American Institute of CPAs at www.aicpa.org.