Financial Q&A: Readers' money questions answered
Why a discounted stock offer is not always a good reason to buy, and how to find the right certified financial planner for you.
I wish to find out if it's a good idea to borrow money from a bank in order to buy shares in a company. I live in South Africa, and a technology company is offering shares at discounted value to a certain category of people.
G.C., via e-mail
A: Before you gallop into this, Drew Tignanelli, a certified financial planner in Lutherville, Md., says you first have to ask whether this company is a good company. If you've satisfied yourself on that point, then you have to consider that borrowing money to buy stock increases the risks to you (if the stock tanks, you still owe the bank what you borrowed).
But if the price you pay for the company is a good deal, then risk decreases.
If you can immediately sell the shares for a profit, then Mr. Tignanelli thinks it's a wise move and the risk is minimal. If you cannot sell for a few days or weeks after you buy, then you need to assess the risk of a stock decline during that time.
I'm a newlywed in my late 20s. My husband and I carried some debt into our marriage, but we have been working very hard to pay it off while making monthly contributions to our retirement and savings. We also hope to buy a home in 2008. How do we find a certified financial planner who fits our needs?
S.B., via e-mail
A: A CFP is a Certified Financial Planner and yes, one might be able to help you even at your age. These are people who have earned this designation by passing a series of exams administered by the Certified Financial Planner Board of Standards.
The organization says its mission is to create uniform standards of competence, practice, and ethics for the people who will advise you on all manner of money matters. It also mandates continuing education to keep its members up to date on new developments in the complicated world of financial planning.
The CFP Board has a search engine that allows you to find a planner in your area. You can find it at www.cfpboard.org. Or call them at 888-237-6275.
A more sophisticated shopping area is the website run by the Financial Planning Association (FPA), a trade group that represents the interests of more than 55,000 CFPs. It offers PlannerSearch, available at www.PlannerSearch.org or by calling 800-647-6340 for a printed listing.
This service allows consumers to search for a planner by city and state, ZIP Code, last name, and even specialty (people with expertise in charitable giving, elder issues, etc.).
Most CFPs like to work with people who have money because they earn commissions from whatever the client may buy as a result of their recommendations. Since you note that you're young and have debt, this may knock you out of their box.
In that case, look to the National Association of Personal Financial Advisors (NAPFA). Many members of this organization are likewise CFPs, but they charge by the hour or job, so they can reach out to people of lesser means.
On its website, www.napfa.org, you can search for a member in your area. Both the NAPFA and FPA websites require searchers to register. It's hardly enough to ruin your day, but it will take a moment or two of your time. NAPFA can also be reached at 800-366-2732.
FPA recommends that people interview at least three planners in person before deciding. The PlannerSearch site provides links to FPA's brochures ("How a Financial Planner Can Help You ... and How to Choose the Right One" and "Hired a Financial Planner? Now What?") as well as interview tips.
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