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Sometimes Recognizing You Need Help Is the Best Move

Millions of Americans have discovered something with the stock market's swings--that adequate financial planning may require a pro.


Now that the stock market--for 10 years the savior of prodigal baby boomers--has suddenly turned fickle, more Americans may be coming to a painful realization: They need substantial help with their finances.

The strategy of saving for retirement by buying the latest hot mutual fund or technology stock is failing many people this year, and millions are discovering that creating a secure retirement nest egg may be a more complicated and time-consuming business than they thought.

When it comes to straightening out your finances, there are two ways to go: alone or with hired help.

Doing it yourself is labor-intensive. If you hire, the problem is finding the right professional. Traditional brokerage firms increasingly offer comprehensive financial management services that go beyond basic investment planning to include such things as retirement planning, estate planning and coordinating insurance coverages. For many people, especially those who have a long-standing relationship with a broker they know and trust, a brokerage firm could be a viable option. It can be particularly helpful if you need help picking stocks, which is the firms' traditional area of expertise.

However, for those who prefer to avoid dealing directly with someone whose main job is selling stocks, hiring a financial planner is probably the best alternative. But how do you find someone who can do what you want at a price you can afford? Here's a 10-step guide.

1. Consider your needs.

Many people think they need help with everything, but their main issues usually boil down to one or two things. You may be great at budgeting, for instance, but not know how to invest. Or you may have invested a lot, but now need tax or estate planning advice.

Write down what you hope to accomplish and prioritize your list. Consider whether your profession or family circumstances make your situation unusual.

This is pivotal for two reasons. First, planners specialize. If you need estate planning advice, you need an expert in wills, trusts and tax issues. Indeed, rather than a financial planner, you may need a tax accountant or attorney. If your main concern is budgeting, you may be able to get free or low-cost help from a nonprofit credit counseling service or a book.

There also are planners who concentrate on helping teachers, for example, or parents of disabled children.

Second, if you tell a planner you want it all, be ready to pay a lot. A full-scale financial plan can cost anywhere from a few thousand dollars to tens of thousands, depending on the complexity and the preparation time required.

2. Decide how--and how much--to pay.

There are three ways financial planners are paid: fees, commissions or a combination of the two.

The fee-only approach eliminates obvious conflicts of interest. It's likely to be the best option for people who have considerably more money than time to evaluate their choices.

However, conflict-free advice comes with an upfront price tag--often $1,000 to $2,000.

Debra McLamb, a 38-year-old lab technologist from North Carolina, is hoping that a fee-only planner will help her save money on insurance products and find investments that will perform well enough to make up for the expense.

"The thing you worry about is whether you'll get your money's worth," she said. "I'd hate to pay $1,000 and have them say: 'You're doing a good job. Keep it up.' That's an awful lot of money for a pat on the back."

McLamb, who works two jobs, has tried to improve her odds by spending the last several months collecting names, numbers and referrals for financial planners in her area.

Commission-based planners, meanwhile, charge nothing upfront but recommend products that give them a cut. If the advice proves sound, this method can be the best value for people with modest incomes. But because these planners don't eat if you don't buy something, you may not get much help in areas that don't generate fees.

If you're somewhere in the middle--say, a family able to meet current obligations but uncertain about whether it's saving enough to address long-term goals--you may be best served by the hybrid: planners who are paid through a combination of fees and commissions.

Such planners will often create a basic plan, for $250 to $500, that evaluates your budget and goals and suggests ways to address them. However, they'll also earn commissions on any products they sell, such as mutual funds that carry a sales charge, or "load," and insurance.

3. Know the potential conflicts involved.

Before you choose a type of planner, evaluate your ability to spot advice that's in the planner's interest rather than your own.

"It's not about how you are paid, it's about putting the client first," said Janet Briaud, a fee-only planner with Briaud Financial Planning Inc. in Bryan, Texas. "There are some very competent people out there who are paid by commissions or fees and commissions. You, the consumer, just have to realize that there can be conflicts."

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