An acquaintance at work hears you'd like to open an individual retirement account. He wants you to meet a friend of his at an insurance company that recently merged with a brokerage. In addition to other financial products -- money market funds, tax-advantaged investments -- it offers IRAs. The insurance representative tries so hard to sell you life insurance, however, even though you keep asking about IRAs, that you end up opening your IRA at a credit union.
To many people, the words ``insurance salesman'' mean hard sell, even though the profession has added the title ``financial planner.'' These people worry about being sold financial products they don't need. They also worry that the guy who sells them insurance may not be knowledgeable on the subject of planning what to do with their money.
Some of this concern is justified. But as more insurance companies and their representatives gain more sophistication, their financial planning programs and training for field representatives have been upgraded.
Just how do you sort through the maze to find a good financial planner at an insurance company?
``Ask for the credentials and background'' of a potential planner, says Stephanie Brown, vice-president of financial planning and corporate research at the Boston-based New England Mutual Life Insurance Company. Look for an adviser that you are ``comfortable in dealing with'' and ``get references and other client referrals.''
New England Life's programs span a wide range of higher-income groups, converging on lower to upper Yuppie levels. For those bringing in an income of $40,000 and up, and for fees of $450 to $5,000, depending on complexity, New England Life will draw up a plan to provide protection, savings, and growth for its clients.
A New England Life representative will gather a client's preliminary financial information -- income, investment goals, and future needs. A team of attorneys and accountants puts together a customized plan. Then the representative works with the client to work out part or all of this plan as the client chooses.
The plan most likely includes some of New England Life's offerings of financial products, from IRAs, money market funds, and tax-advantaged products to pensions for small business owners.
At John Hancock Mutual Life Insurance Company, also Boston-based, a $1,500 fee brings financial planning services to people with a net worth of at least a quarter of a million dollars and income of $50,000.
In several one- to four-hour sessions, a counselor puts together three to five alternative customized strategies for the client on each of several topics. Topics include cash flow, taxes, estate planning, retirement planning, and college planning.
Clients ``love to talk about their finances,'' says Theodore Bohner, director of the financial planning group at John Hancock. Because of the confidentiality of the topic, sometimes the counselors are the only ones with whom clients can discuss and plan strategies.
These meetings, in which a client can decide to accept or reject any part of the strategies, take place over a period of six to 12 months.
Strategies are tailored to each client's individual goals and needs. For example, Mr. Bohner says, suppose someone is ``piling up money in a haphazard way.'' He's looking for the highest rate of return, and he doesn't stop to think about whether a particular instrument is appropriate for his objectives. He invests in a relatively illiquid real estate syndicate. When he needs money for his child's college education a few years down the road, he has to borrow it, or sell the family vacation cottage at a loss.
Fee-based planners caution that financial planners at insurance companies are not independent of the products they sell. ``Insurance companies have a vested interest in selling their own products,'' says Richard E. Thayer, a lawyer at Asset Management Associates Inc., based in Salem, Mass.
But the fee in fee-based financial planning may be too steep for some. Hancock's $1,500 fee is as low as it is, Mr. Bohner says, because an important purpose of the service is ``to market other services.'' Of the concern that the plan may be loaded with too many insurance products, he contends, ``Clients don't worry about that.''