Choose a financial
PLANNER
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inancial decisions have become more complex for most individuals. Two-income households, increasingly complex tax laws, financial deregulation and a greater variety of saving and investment options have increased the number of decisions an individual or family must make and the difficulty of those decisions. Today both middle- and upper-income families may have a need for a financial planner either at specific times or throughout the life span of the family. Personal financial advisers — also called financial planners or financial consultants — generally assess the financial needs of individuals and provide them with a wide range of options, according to the Bureau of Labor Statistics, U.S. Department of Labor, Occupational Handbook, 2002-03 Edition. Personal financial planners are professionals who design an overall strategy to meet specific financial objectives. Some of the issues they address are retirement planning, estate planning, tax law changes, funding for college and general investment options. Most planners are generalists and offer advice on a wide range of topics. Some specialize in areas such as estate planning or risk management. When to consult a planner Major life changes, such as a new job, a raise, marriage, parenthood, divorce, widowhood, or substantial inheritance or other windfall, are events that may prompt consultation with a financial planner. If you are within 30 years of retiring, a financial planner can help you plan for adequate retirement income. Or, if your financial affairs seem generally disorganized and without direction, a financial planner can help you measure where you are now, help you decide where you want to be and design a plan with options to meet your goals. Generally, single persons with an annual gross income more than $30,000 and married couples with a combined income of $40,000 or more may find a financial planner useful. If you earn substantially more, it is likely a financial planner could help you coordinate the advice you receive from other professionals
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and consultants such as your stockbroker, accountant and/or attorney. The planner’s job An adviser’s work begins with a consultation with the client, where the adviser obtains information about the client’s finances and financial goals. Based on the information provided by the client, the adviser draws up a comprehensive financial plan that includes an identification of problem areas and recommends steps to improve the financial status of the client. The plan will contain the adviser’s description of investments that would help the client meet goals, taking into consideration the client’s tolerance for risk, long- and short-term goals and current financial status. The plan may be discussed verbally, but most often it is presented to the client in writing. Financial advisers recommend an update at least once a year to evaluate the success or shortcomings of the plan and to review any changes that may be indicated. Normal and unexpected events in the client’s life can affect the overall plan, as can changes in the viability of the investments. According to the Department of Labor’s job description, personal financial planners may be involved in buying and selling financial products, such as mutual funds or insurance. Some also assume the management of their clients’ investments. Education and certification A college degree is not a prerequisite for becoming a personal financial adviser, although many in the profession hold bachelor’s degrees or post-graduate degrees. Certification is not required, but obtaining certifications, such as certified financial planner (CFP) or chartered financial consultant (ChFC) designations, can enhance professional standing. Certifications also assure prospective clients that the planner has extensive training and has demonstrated competency in the area of financial planning. The certified financial planner designation is issued by the CFP Board of Standards, which reviews relevant experience, education requirements and performance on a comprehensive examination. The certifying board also requires adherence to an enforceable code of ethics. The chartered financial consultant designation is issued by the American College in Bryn Mawr, Penn.
This designation indicates that the planner’s experience and completion of an eight-course study program have met the board’s requirements. Both designations carry a requirement for continuing education for maintaining standing with the certifying boards. There are no requirements for licensure for personal financial planners who limit their professional activities to evaluating their clients’ finances and making recommendations to reach financial goals. Financial planners who sell stocks, bonds, insurance or real estate as part of their professional activities often are required to obtain professional licenses from the state in which they practice. Fees Generally, financial planners charge the client an hourly fee for services, or they may charge a specified fee for the specific service performed. A fee for a comprehensive plan may vary depending on the complexity of the plan. When a planner manages a client’s assets, the fee for services may be a percentage of the assets under management. The purchase of any stocks, bonds, insurance, real estate or other investment instruments is a charge incurred by the client in addition to service fees. Selection process Selection of a personal financial planner requires the same careful process as choosing any professional service provider. Solicit recommendations from your friends and colleagues. Schedule an introductory appointment with at least two professionals so you will have a basis for comparison. Ask about education, experience, specialties, fees and scope of services provided. Assure yourself that the person you select is someone you trust and with whom you feel comfortable discussing personal financial matters. Conduct an interview in much the same way you would conduct an interview with a prospective employee. In effect, this individual, although an independent contractor, will be working for you. After you have selected your personal financial planner, continue to monitor your investments and financial status, working with your planner to evaluate your progress toward your goals and to make adjustments if necessary. In the final analysis, it is your money, your decision and your future.