Evaluating the Experts: Choosing a Professional Planner

by Todd Dosher

Types of planners

Several types of planners specialize in a variety of areas:

• Financial planners: Money magazine Senior Editor Joseph S. Coyle calls these individuals the "generalists of the group." Their training covers a broad spectrum of specialties that includes budgeting, investing, insurance, and retirement planning.
• Fee-only planners: Fee-only planners develop financial plans to fit your needs. They receive no commission for recommending products or services, but will charge an hourly fee for their efforts.
• Fee and commission planners: These planners charge a flat fee in addition to collecting commissions on investments sold to you. Once commission rates are tallied, you may end up paying more for their services.
• Commission-only planners: Commission-only planners receive all of their income from commissions garnered from your investment purchases. Keep in mind, commissions are their livelihood--investment vehicles they pitch may not be the best for you.
• Money managers: Money managers put together a portfolio of stocks and bonds designed to meet your needs. Transaction fees tend to be higher, but their success is based upon how well they perform with your money.
• Salespersons: Salespeople are the ones who call on the telephone wanting to sell their organization's investment product. While not necessarily bad, keep in mind you know nothing of them or their business, and they don't know you or your goals.
  Don't be afraid to ask tough questions and demand specifics.
• Planners at credit unions and banks: Most credit unions and banks offer member-focused financial planning and money management help, via face-to-face meetings, and also through their Internet sites. Many credit unions offer in-office financial planning through a program called MEMBERS Financial Services, offered by CUNA Mutual Group. Registered representatives provide an array of investment and insurance products. These representatives offer financial planning strategies along with investment options such as mutual funds, annuities, individual stocks, and life, accident, disability, and long-term care insurance.
• National Foundation for Credit Counseling™ Inc. (NFCC): Founded in 1951, the NFCC, Silver Spring, Md., through its member agencies, sets a national standard for quality credit counseling, debt reduction services, and education for financial wellness. NFCC members, often known as Consumer Credit Counseling Service (CCCS) or other names, can be identified by the NFCC member seal. This seal signifies high standards for agency accreditation, counselor certification, and policies that ensure free or low-cost confidential services. NFCC member offices can be reached in communities nationwide, toll-free at 800-388-2227, or online. Note that credit counselors focus on helping people overcome credit management problems; they do not provide investment and financial planning services.

When researching planners and establishing a list of prospective candidates, keep in mind that planners are required to maintain their credentials to operate in a specific area of expertise.

According to Coyle's book, "How to Retire Young and Rich," certified financial planners (CFPs) and chartered financial consultants (ChFCs) are required to pass a series of exams relevant to their field. CFPs maintain a broad base in all aspects of personal finance, and ChFCs have an insurance background.

You also may see the designation chartered financial analyst (CFA), often a money manager, or personal financial specialist (PFS), usually an accountant or tax adviser.

Before you meet a planner

To meet with a prospective planner, prepare questions that are important to you. Do not be afraid to ask tough questions and demand specifics. It's your money. If you don't like the answers, look elsewhere.

Ask to see the planner's ADV form (for "adviser"), a résumé of sorts that details the adviser's educational background, credentials, compensation methods, and business affiliations. To register as a financial adviser, applicants must file this form with the Securities and Exchange Commission (SEC).

Do a record check. Coyle recommends contacting the SEC (202-942-7040) and your local state securities agency (Department of Commerce). You can ask the prospective planner if he or she has ever been disciplined, but the above contacts could be more revealing and offer more detail if there has been a problem.

Ask for references, but be careful. It's easy for planners to name two or three people who will say good things about them. Instead, ask for professional references from other investment professionals or lawyers who are familiar with the adviser.

Published September 8, 2003, Reviewed February 19, 2007

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