Skip to: Content
Skip to: Site Navigation
Skip to: Search

Hunting for a financial planner? First off, be your very own

By Thomas WattersonStaff writer of The Christian Science Monitor / April 8, 1986


They seem to be everywhere. Financial planners appear between tackles in the Super Bowl. Their full-page ads turn up in magazines and newspapers. The columns of listings for financial planners grow longer in the Yellow Pages with each new edition.

Skip to next paragraph

Since 1983, membership in the 15-year-old International Association for Financial Planning has nearly doubled, rising from 12,659 to 24,179. Some of the people in the IAFP are accountants, lawyers, brokers, or insurance representatives and do not do full-time planning. But two-thirds are practicing financial planners, an IAFP spokeswoman says.

The business of financial planning has mushroomed so fast that it's hard to know who the various kinds of planners are, what services they offer, what they might be selling, and whether you really need one.

The financial-planner species comes in many forms.

There are fee-only specialists who don't sell anything other than their planning services and so aren't motivated by commissions on financial products.

There are planners whose only income is from commissions, either because they work for an insurer, brokerage, or some other company, or because they represent several financial-service firms.

And there are ``hybrids'' of the two who charge a fee and can sell products.

All of them have a place in the business, and an honest planner in each category can do a good job for the right kind of client. You, the financial planner

Then there's a fourth variety of financial planner -- yourself.

In many cases, says Thomas J. McFarland, a planner in Burlington, Mass., people read about financial planning or see an ad somewhere and decide they need the services of a full-line planner. What they need instead is to ask themselves some basic questions:

Do I have three to six months' take-home pay in a secure savings account?

Do I know how much life insurance I need, and have I bought it?

Do I have an individual retirement account (IRA) or some other retirement savings program, and am I funding it regularly?

Do I know how much I'm spending and how it compares with income?

If I have children and plan to send them to college, do I have a plan in place to save for it?

Do I have a will, including trust provisions for any children?

For many people in moderate income brackets, just coming up with positive answers to these questions may be all the financial planning they can afford. Even many people in higher brackets haven't gone through these steps or looked at some of the savings and investment alternatives that fulfill the needs.

``For a great many people, a complicated financial plan is not needed at all,'' says Lewis J. Altfest, a planner in New York. ``People come in who don't have much in savings and they want to start putting money in the stock market or municipal bonds. I might tell them to take care of these other things first. It may not make them feel good, but it's really the best thing for them.''

The reasons for doing at least preliminary financial planning yourself are many and perhaps obvious.

One of the best reasons, however, may not be so obvious: The more you know about your own financial situation and what you can afford and your risk tolerance, the less chance you have of becoming a target for product-oriented planners, brokers, and other financial service people who want to sell you something you might not need.

``Even though someone has been educated about finances, a good salesman can uneducate them very quickly,'' says Ronald P. Meier, a planner in Kingwood, Texas. ``Salespeople are trained to overcome objections, to have a good story to back up whatever they're trying to sell.''

Having a better idea of what you want and can afford will help overcome some of these tactics, he believes. Staying on the right track

Not surprisingly, all the planners interviewed say that even those who do their own plans should see a professional planner eventually, if only to have someone say they're on the right track.

Even for people of modest means, a planner may be able to suggest other places to save, find less-expensive insurance coverage, or point out ways to provide for college while decreasing taxes.

``It may be worth it to go out and spend $200 or $300 for a couple of hours just to have someone tell you you're right,'' Mr. McFarland says. ``I've had people come in who have done their own work and their own calculations, and a lot of times they do very well.''

Most fee-based or fee-and-commission planners charge from $75 to $150 an hour. But once you get on the right track, you may only have to see a planner once every few years.

``There's not a whole lot of mystery to financial planning,'' acknowledges Joseph Deitch, a planner in Newton, Mass. ``On the other hand, people don't do it.''