Before you entrust your finances to a professional planner
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Picking a planner is also a matter of personal rapport; people have all kinds of ways of determining this. ''I've had people call me up and ask, 'How old are you?' '' says Mr. Porter.Skip to next paragraph
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Some prospective clients, says Mr. Croft, are ''numbers crunchers'' who need help seeing the larger issues of financial planning; others see the ''big picture'' easily but need help translating that picture into an action plan, with all the blanks filled in.
You should also consider:
* Does the planner earn a living from fees, commissions, or, like the majority of planners, a combination of both?
* Is the planner ''product oriented'' - i.e., employed by a firm with investments, annuities, insurance policies to sell?
* If the planner does indeed wear a salesman's hat as well, is he part of a captive sales force, selling only one company's products? Or does he have access to a broad range of investments?
* How can the planner help you carry out your plan? There's no point in paying for financial advice if you don't act on it. On the other hand, you don't want to be guided - or pushed - into the wrong investments just because your planner wants to make a commission.
Every individual will find his or her own right answers to these questions. In the abstract, at least, the right answers are those indicating a planner who is not a salesman and who is as independent of ''product'' as possible.
But independence has its price - easily several thousand dollars for a basic financial plan, for example - which may be simply too high to be cost effective for the low end of the market. So the best solution for these people may be to go to a product-based planner with both eyes wide open and remember they are likely to do better with long-term planning reflecting a certain bias than with no planning at all.
Jeffrey R. Secord CFP of Integrated Resources Equity Corporation in Encino, Calif., says, ''Clients should be concerned with the motivations of the people they deal with. But you have to figure out where you want to go. People set up obstacles for themselves worrying about commissions instead of the return on the investment.''
Al Jeanfreau, a CFP in Portland, Ore., charges fees and commissions and maintains that 95 percent of his clients come to him for his investment track record. But he adds, ''I'm looking forward to the day when commissions come down to the point where we can just charge a straight fee.''
Sam Marinella, president of Torchmark Financial Services Inc. of Boston, makes a strong case for product-based firms. Torchmark's financial planning unit , Waddell & Reed in Kansas City, serves a middle-American clientele: ''We can work with almost any level of income, as long as they've got life insurance and an IRA,'' he says.
Waddell & Reed charges no planning fees but sells, on commission, products developed by other Torchmark units.
Mr. Marinella defends the product sales as essential to ensuring the plans get implemented - ''I'd rather have even a poor financial plan and have it implemented than a beautiful plan that sits on a shelf.'' He also maintains that the customer is better off with a planner selling a few in-house products the planner knows well than with an independent planner who must track vast constellations of mutual funds, limited partnerships, and other investments.
On the other hand, Mr. Porter points out that the solution to a financial-planning problem is not always a product. A client wanting to reduce taxable income, for example, could do so by investing in a real estate partnership - but it might be more appropriate to defer income under a 401(k) program, with perhaps the additional advantage of an employer match.
Once you've picked a planner, just what should you expect to get?
Mr. McFarland says you should expect a financial planner to provide you with tax projections, a cash flow analysis, budgeting help, and a balance sheet showing your net worth. He advises getting a financial planning contract.
Your planner should tell you what to bring to your initial data-gathering interview, if you haven't already discussed this matter as part of the get-acquainted process. The amount of detail the planner expects might be another indication of whether you're on the same wavelength. Mr. Gainsborough, for example, asks clients to bring insurance policies, data from wills and trusts, checkbook stubs, statements of corporate perquisites, brokerage statements, and other relevant documents. All this gets spelled out in a form letter to new clients ''which even tells them where to park,'' he adds.