Make a Plan: Taking the Time to Find the Right Financial Adviser Is a Shrewd Investment

Carl Mahler would like to change the way most people view saving for their futures."The definition of risk for those who grew up in the Depression is to lose all their money. But the risk for Boomers is that we'll outlive our money. We're living 20 to 30 years into retirement, so we need to figure out how to have growth of income, not growth on income," says Mahler, a certified financial planner (CFP) and president of The Pinnacle Group.If the concept of having to live off of your savings for 20 to 30 years makes you panic, it may be time to see a financial planner. Financial planners offer a variety of services, not all of which are the exclusive province of the wealthy. "A financial plan is a complete roadmap for retirement," says Loretta Williams, CFP. "I think it's useful for anyone who has made contributions to retirement plans and has been employed and made contributions to Social Security. I often see people come in who are emotionally ready to retire, but haven't analyzed their finances. I see a plan as a tool for people to use to make better decisions."Kevin Deckert, CFP/CFS (certified fund specialist) and president of Deckert & Associates, agrees, viewing the financial plan as a process that is not dependent upon having a high income. Even those just starting out in their careers can use help to get more benefits less expensively with more take-home pay."Often, people don't understand some of the opportunities and choices they have financially, so they don't utilize them to maximize their income," he says. "My perspective as a planner is to budget the most effective way to maximize use of the dollars they have. Everybody should plan and it doesn't hurt to get advice from a professional at any level."And as everyone knows, the earlier you start planning and saving for retirement, the better off you'll be. Mahler started with clients 20 years ago who could only afford to put aside $25 per month; today their accounts are in the hundreds of thousands."I recommend starting at birth," says Mahler, only half-joking.An important distinction among financial planners is that many deal exclusively with asset management rather than the development of financial plans, although the majority do both. In most asset management cases, the planner charges a small fee based on the value of the account to manage the portfolio (typically 1 to 2 percent annually); the minimum account would be around $100,000. Hiring a planner to evaluate your current financial circumstances and give advice is usually billable on an hourly basis. In the Richmond area, those rates range between $75 to $150 per hour. Williams estimates that a plan for a typical couple in their late 40s with reasonable assets, retirement plans, some stocks, but excluding limited partnerships or extensive real estate holdings, would take about 15 billable hours over a three- to four-week period. In the initial consultation, the estimate for time and the terms of payment should be discussed. Most financial advisers have at least one professional credential, including CFP (certified financial planner), CPA (certified public accountant), Chfc (chartered financial consultant), and APFS (accredited personal financial specialist).The most common credential is CFP, which is akin to a general practitioner in medicine; many CFPs go on to achieve credentials in specialties such as CFS (certified fund specialist), for mutual funds.CFPs have a broad base of education and must pass the exams and licensing requirements of the CFP Board of Standards, as well as continuing education requirements. The best advice is to find a CFP who is practicing; a lot of advisers have the credentials but hold jobs that don't keep them current. To verify if a planner's credentials are still active and not revoked or suspended, call the CFP Board of Standards in Denver at (303) 830-7543 or (888) CFP-MARK. To find a list of planners in the area, consumers may call for a reference list and biographies of local planners from the Institute of Certified Financial Planners, (800) 282-7526.One important aspect to remember is that the State Corporate Commission (SCC) does not regulate financial planners, but does keep tabs on investment advisers. Few financial planners eschew investment advice, however, so it's good to know that both the SCC and the Securities and Exchange Commission (SEC) require investment advisers to register themselves and file an adviser's form known as the ADV form. The ADV form lists the professional credentials, fee methods, contractual relationships with outside companies, brokerage affiliation and the like. Consumers can call a CFP and ask to have a copy of the ADV form sent out for review. An ADV form is more useful than a list of references, say most financial planners. "A CPA is bound by confidentiality and can't provide a list of references," says William Kuehl, CPA and CFP with Investment Consultants and Management Co. "References aren't key to finding a good planner, it's finding out about conflicts of interest and experience that's important."To test the objectivity of the advice consumers receive, it's helpful to ask about conflicts of interest. Kuehl says a commission is a potential conflict. Any adviser with a Series 7 license is receiving a commission from somewhere. Advisers often receive "soft costs" from vendors, as well -- such as fully-sponsored seminars in exotic locales about a new financial product that require a certain amount of product to be sold afterward. "If you can find out about that, you'll often see those are the products presented to you," Kuehl says.Just because an adviser can sell products, however, doesn't rule them out for help."There is nothing wrong with being sold financial products, as long as they fit your needs and your planner makes sure you understand them," Mahler says. "But if the planner sells products, ask if the product can be obtained if no plan is prepared. Buying financial products without understanding the product or having a plan of action is like having surgery without an exam. ... The same holds true for a financial planner who sells products without an analysis. If you take away the planning and education process, you are left with nothing more than a product salesman."Finally, remember that a financial plan is a tool and the tool is only as good as the person who knows how to use it. Deckert stresses that the consumer has to understand and agree with the advice he or she is paying to receive from a financial planner. "The consumer is deserving of two things from the planner: Does the consumer have the planner's ear? Too many planners are too quick to give answers before they hear the whole situation. And does that planner spend some time educating the consumer about what he is recommending? Many problems come up between the planner and consumer because the consumer didn't understand the plan," Deckert says.It's your future, and with a wise plan, you may be able to afford it.

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