Finding a financial planner: look into training, what else is for sale
Boston — Before he became host of the "Tonight" show, Johnny Carson was emcee of a shortlived game show called "Who Do You Trust?" That might be a suitable title for the effort to find a good financial planner: someone who can not only help people make-- or at least save -- some money, but is at least as interested in the client's financial well-being as in making money for himself or herself.
In fact, say financial experts and even some consultants themselves, people would do well to remember that financial planners are in their professions for the money. Most of them have something to sell besides plans and advice. Many of them may be very capable financial planners, and people who go to them may receive good advice. But they may also receive a sales pitch for stocks, insurance, or mutual funds.
Planners who work for brokerage houses, for instance, often charge nothing for their services, but they hope eventually to sell some stock or other securities, sales which will bring them commissions.
People who work for insurance companies can be expected to try selling one of their firm's products. And even many "independent" financial consultants who are not affiliated with any firm have licenses to sell securities and insurance policies.
One such firm is Peter Ferrucci Consultants, of Suffern, N.Y. "Peter makes more money on commissions than he does on financial planning," acknowledges Maxine Hassenzahl, a financial planner with the firm.
For many people, financial planning is really tax planning, that is, finding ways to control income, capital gains, and spending to legally avoid overpaying taxes. Thus a tax accountant who is kept on retainer may be as useful, in some cases, as a financial planner.
But if you've decided to put your personal economic future in the hands of a professional financial planner, how do you go about finding one?
As mentioned before, many brokerage firms have in-house financial planners. A call to some of these firms may turn up one of them. Some consultants are listed in the Yellow Pages under "financial planners," "financial consultants," or "investment advisers." However, no qualifications of any kind are required to buy space in the phone book, so some checking of references would be a good idea when finding a planner this way.
"Any good planner should be able to give you a list of references," says Ahmad Fakhr, who heads a financial planning unit at Paine, Webber, Jackson & Curtis Inc.
A less scientific method, but one that may yield more satisfactory results, is to ask around. "Almost all of our clients come through referrals," Ms. Hassenzahl says. "So people who send their friends to us are usually pretty satisfied and don't need references."
Apart from references, what qualifications does a person need to be a financial planner? Legally, none. And getting to be an investment adviser isn't difficult.
"For $150, a completed form, and a sworn statement that you have not been convicted of any securities law violations, you can become a registered investment adviser," said Michael Berenson, director of investment management in the Securities and Exchange Commission's office of investment adviser regulation. "No knowledge of securities laws or training of any kind is required."
In an effort to correct this problem, Mr. Berenson said, his office is conducting an investigation that may lead to a recommendation that the full commission adopt some minimum training or testing requirements. "No target date has been set" for completion of this investigation, he said.
While many financial planners have no formal training, many others have taken lengthy instruction. A prospective customer might want to ask if the consulant has any specific training. One school is the College of Financial Planning, a correspondence school based in Denver. To qualify for the courses, a student must have a year of experience in the financial planning area and pass a detailed entrance exam, says Diana Rampy, executive director of the Institute of Certified Financial Planners, an organization made up of graduates of the program.
The school's 18-month course includes material on taxes, savings plan, estates, and some legal matters. When it is over, and when they have passed another series of tests, the graduates can put the initials CFP after their name , for certified financial planner.
Other schools, including Adelphi university in New York and Brigham Young University in Provo, Utah, have started financial planning programs.
But perhaps the most important part of the financial planner selection process is the personal interview. Remember, planners advise clients, we may have a lot more know-how about money matters than you do, but you are hiring us to work for you. A client should not be shy about asking about the consultant's experience, training, and areas of specialization.
"Find out if the planner's background is in the areas you need," says Jane King, a financial planner with Keystone Massachusetts Inc., a Boston investment firm. For instance, if the consultant has specialized in estate planning, he may not be best for the needs of a young married couple, she says.
The planner should also be willing to give clients a plan they can handle. "If I tell someone they should be saving $200 a month, they can tell me if that's too much and we'll find a le vel they're comfortable with," Miss King adds.