BOSTON — If you're like millions of Americans, the financial future lurks with a threatening uncertainty.
Huge bills for college tuition, retirement, or both are creeping up on the foundation of your finances like a 500-year flood.
Before beginning to sandbag savings, you might seek professional help. A financial planner can match your resources to both your needs and risk tolerance.
She or he can help you face a host of financial challenges: retirement, money management, insurance, investments, even taxes.
Be careful, though. Anyone can flaunt the title "financial planner." Many are incompetent; others enrich themselves at their clients' expense. Some are downright fraudulent, say experts and regulators.
"You could graduate from high school, hang out a shingle, and say you're a financial planner," says Carole Badger, president of the National Association of Personal Financial Advisors in Buffalo Grove, Ill. "Unfortunately, it's up to the consumer to ask the right questions," she says.
Abuse crops up in part because of spotty regulation. Rules and resources at both the state and federal level focus largely on investment advisers not financial planners. The Securities and Exchange Commission (SEC), for example, has the resources to inspect the average advisory firm once every 30 years.
"There are limits to what regulations can do," says one SEC official. "We can prevent the felons and criminals from entering the industry, but we can't prevent the people who are in the industry from becoming felons."
Mediocre financial planners get by because they enjoy a seller's market as baby boomers become more affluent and focused on retirement.
And beware of conflicts of interest. Some planners earn their keep through fees they charge you. Others receive commissions through financial products they sell you. Some dabble in both.
Many experts favor a fee-based plan because it avoids conflicts of interest.
For example, stockbrokers who double as planners might recommend mutual funds that pay them a commission over those that don't.
Fee-based plans will cost you more, about $1,200 plus annual checkups. But it's something you keep for life.
So, as Ms. Badger says, it's up to you to ask the right questions. Here are some guidelines:
* Seek referrals. but not just from family and friends. Check with a lawyer or an accountant you know and trust or call trade organizations (see box).
* Review education and experience. Five years of hands-on experience is vital. So is a piece of paper that says chartered financial consultant (Ch.FC) or certified financial planner (CFP), credentials that require training and continuing education.
* Clarify compensation: fee, commission, or both?
Ask for client references. If the planner is reluctant, you should be, too, in your selection.
* Ask to see Part II of the planner's ADV, a disclosure document filed with the SEC and state regulators. This helps expose potential conflicts of interest. It spells out a planner's background and how he or she is paid. If the box, "sells products or services other than investment advice," is checked, the planner is not fee-only.
* Ask for ADV Part I, which a planner is not obligated to reveal. It discloses disciplinary problems. If the planner is reluctant to show you the form, you should be reluctant to show your checkbook.
* Pin down the service. Will your financial plan cover goals and offer advice on cash management, budgeting, taxes, investing, estate planning, insurance for disability and health, retirement, and in other areas? Does the planner provide a written plan plus periodic updates and help in implementation?
For help or referrals, three organizations will gladly help:
National Association of Personal Financial Advisors. Members are fee-only planners: 800-366-2732.
Institute of Certified Financial Planners. Members earn their keep through fees, commissions, and/or salaries and must be certified and keep up with continuing education: 800-322-4237.
International Association for Financial Planning: 800-945-4237.
Some First-Rate Investment Guides:
The Only Investment Guide You'll Ever Need
By Andrew Tobias
Harcourt Brace, $12
By Eric Tyson
IDG Books, $19.99
How to Invest
By Nancy Dunnan
Harper Perennial, $12
The Wall Street Journal Lifetime Guide To Money
Dun & Bradstreet Guide to Your Investments 1997
By Nancy Dunnan
Harper Perennial, $19
Marshall Loeb's Lifetime Financial Strategies
By Marshall Loeb
Little Brown, $27.95
The Beardstown Ladies'
Stitch-in-Time Guide To
Growing Your Nest Egg
Beating The Street
By Peter Lynch
Simon & Schuster, $23