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Picking the Right Financial Planner

December 25, 1991|KATHY M. KRISTOF

Year-end is often a time of reflection. Consumers look back on the days gone by and consider what they've done and what they'd like to do in the year ahead.

Such reflection is a particularly good idea when it comes to finances. Each year at this time, it is advisable to review your financial plan and consider whether it is getting you where you want to go.

For some, this review will be a cursory and gratifying affair. Those who have a thoughtful financial plan that they've stuck to are likely to find that they are making progress in reaching their economic goals.

However, the picture will look far bleaker for those who have been unrealistic about what they could do, failed to follow their financial plan or never bothered to plan at all.

If this describes you, it may be time to get your act together and visit a financial planner. Not everyone needs the help and advice of a professional. But if you have been working for several years and never seem able to get ahead financially, you should consider it.

Be wary, however. Not all financial planners are alike. Some are highly skilled, helpful and attuned to your needs. Others are simply salesmen who care less about your financial goals than about generating commissions on products that they persuade you to buy.

How do you find and choose a financial planner?

Approach the search as you would if you were looking for a good general contractor, dentist or doctor. Ask your friends and business associates if they use someone they'd recommend. Make sure that you ask several people and have more than one planner to choose from.

If your friends are no help, consider contacting professional trade organizations. The International Assn. for Financial Planning offers a free referral service to consumers who call or write them at 2 Concourse Parkway, Suite 800, Atlanta, Ga. 30328. Phone: 404-395-1605.

Consumers who request it will get names of five IAFP planners in their area, a consumer guide and a copy of the group's recommended pre-engagement disclosure form. However, they should know that the group also passes on their names and addresses to the planners who have been recommended.

Consumers also need to know up-front that there are three types of financial planners:

* Fee-only planners charge by the hour or by the value of assets you have them manage. They have no financial interest in products that you buy or sell.

* Commission-only planners do not charge the consumer for advice but get a commission on investment products they sell.

* Fee-and-commission planners do a bit of both. They charge hourly fees for their advice, and they also get a cut if you buy products through them.

Which type to select depends on how much money you've got to spend and how impressionable you are.

Certainly you should meet the financial planners you are considering. Such meetings should help you see whether the planners are attentive to your needs and whether you can trust them. If you get the feeling that a planner is more interested in selling a product than in determining your needs, get out of there quick. One-size-fits-all financial products and plans are often a pattern for disaster.

Finally, you have to examine planners' experience and qualifications. There are several questions you should ask: What are the planners' professional and educational backgrounds? How long have they been in the business? Will they provide references? Will they show you financial plans that have been drawn up for others? (You should see at least two.) Are they members of financial planning organizations that have continuing education requirements and ethical standards?

Also find out whether your planner is registered with any one of a number of government agencies, such as the Securities and Exchange Commission, the National Assn. of Securities Dealers or the Department of Insurance. If they are, you can usually get information from those agencies about whether the planner has been previously punished for wrongdoing. Normally, however, you cannot get information on pending regulatory actions.

Finally, there are a number of professional designations that will give you an idea of how much schooling and experience your planner might have. Some of the most common include Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC) and Certified Public Accountant (CPA). All three require several years of study, the ability to pass long, arduous exams and usually some continuing education.

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