Time to Hire a Financial Planner? You Bet.
With the stock market at levels lower than a decade ago, many would be understood for turning to a locked safe in their closet rather than a financial advisor.
They’d be wrong.
At their worst, granted, a financial advisor can be little better than a salesman hawking a time share in Florida — in the middle of the Everglades. At their best? A financial advisor can be someone who can help a family steer its finances towards solid financial footing. Now I’m not talking about getting you into that hot IPO. (Are there really any of those anymore???) I’m talking about their ability to create budgets, guide you through an estate plan, figure out how to pay for your children’s college education, and of course help you build for your retirement.
The question is, how to find a good advisor that you can trust and work with comfortably — someone you believe is working towards the goal you want, and not towards an agenda they have. If there isn’t one in the family fold (which isn’t always the best route anyway) then you can turn to one of the big firms like Morgan Stanley Smith Barney or Wachovia, if you have enough cash, or find what’s called a fee-only financial planner. For many families, this is going to be a more popular route.
Fee-only planners charge based on the work they do — and not on the size of your accounts. So as your assets grow, you continue to pay the same rates. Some critics of fee-only advisors say that this is actually a problem. That by earning fees based on the amount of your assets, they have an incentive to grow your money. In that scenario, as you earn money, they earn money.
But proponents of fee-only say that by charging for the work, you can trust that there’s no commissions at play. They argue that your doctor doesn’t get paid extra for a positive result on an X-ray. You trust that they’ll give you good care.
Plus, there are organizations that hold fee-only advisors to certain standards and ethics. A good one is the National Association of Personal Financial Advisors (NAPFA), which has comprehensive listings and consumer information on advisors in your area. It may not have all the answers, but it’s certainly a good place to start with questions.
They’d be wrong.
At their worst, granted, a financial advisor can be little better than a salesman hawking a time share in Florida — in the middle of the Everglades. At their best? A financial advisor can be someone who can help a family steer its finances towards solid financial footing. Now I’m not talking about getting you into that hot IPO. (Are there really any of those anymore???) I’m talking about their ability to create budgets, guide you through an estate plan, figure out how to pay for your children’s college education, and of course help you build for your retirement.
The question is, how to find a good advisor that you can trust and work with comfortably — someone you believe is working towards the goal you want, and not towards an agenda they have. If there isn’t one in the family fold (which isn’t always the best route anyway) then you can turn to one of the big firms like Morgan Stanley Smith Barney or Wachovia, if you have enough cash, or find what’s called a fee-only financial planner. For many families, this is going to be a more popular route.
Fee-only planners charge based on the work they do — and not on the size of your accounts. So as your assets grow, you continue to pay the same rates. Some critics of fee-only advisors say that this is actually a problem. That by earning fees based on the amount of your assets, they have an incentive to grow your money. In that scenario, as you earn money, they earn money.
But proponents of fee-only say that by charging for the work, you can trust that there’s no commissions at play. They argue that your doctor doesn’t get paid extra for a positive result on an X-ray. You trust that they’ll give you good care.
Plus, there are organizations that hold fee-only advisors to certain standards and ethics. A good one is the National Association of Personal Financial Advisors (NAPFA), which has comprehensive listings and consumer information on advisors in your area. It may not have all the answers, but it’s certainly a good place to start with questions.
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Comment by Lisa C. Decker on March 30, 2009 at 6:36am
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As a financial advisor, I can tell you that there are extremely competent advisors who can give you guidance and options available and appropriate for your situation. Definitely make sure that the person you are working with is not just a glorified salesperson who is looking to make a commission on you and then be gone. If they are new to the business, see if they are being mentored by someone with more experience who you can consult with in addition.
Check out their broker/dealer as well. You can contact their regulatory boards (State insurance regulatory body, FINRA) and ask for records of any violations to be mailed to you. What an eye-opener that can be! Buyer beware, never, ever invest in something you do not fully understand and have not read all the paper work for (yes, I know it's endless, can really be a great cure for insomnia!). Most prospectuses have a synopsis where you can at least get a feel for what it's all about and then delve further into it in the areas where you have more questions.
Take responsibility for your choices. My advice is to interview several financial advisors, find out about their investing philosophy, their options available for you to invest in, their minimums to work with them and then decide who feels right for your situation. Make a plan and follow through. That's the best way to profit in the long run and keep your sanity so you can sleep at night!
Lisa C. Decker
Miss Money Matters™
Certified Divorce Financial Analyst
“Divorce Your Spouse, Not Your Money™”
www.DivorceMoneyMatters.com
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Comment by Viktoria on February 28, 2009 at 4:13am - To not take the money that had to pay financial advisers, it is necessary to have so much money that they do not think. You know how to count money, and create and have financial freedom and residual income? What do you think about this? Which way do you?
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