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Published: Saturday, 11/16/2002

How to decide if you need an adviser


Stung by the stock market, staring into the financial abyss, or simply trying to put your financial house in order? You have two choices: Do it yourself or get help.

If you decide to seek help from a financial planner, ask family and friends for a recommendation, then check the person's credentials. Although there's no guarantee against incompetence or fraud, credentialing groups help ensure that the adviser is trained and has a clean record.

Such designations are certified financial planners, who must have three years' planning experience and pass a 10-hour test for certification to earn the credential; certified public accountants, who take extra training to become personal financial specialists and must be re-certified every three years; and chartered financial consultants, who take a 75-hour course from American College in Bryn Mawr, Pa., and pass a test.

Once you've narrowed the field to recommended names and have checked the credentials and type of advice offered, start calling local planners. The Forum for Investor Advice (www.investoradvice.org) has a good question-and-answer scorecard.

Some planners rule themselves out right away if you don't meet their minimum net worth requirement; others gladly send brochures outlining their services and background. Some may give you a free first meeting; others charge for initial consultations. Ask first.

Also ask for a planner's ADV form, Parts I and II, which the U.S. Securities and Exchange Commission issues to registered investment advisers. There's no test or training required to register as an investment adviser, but the form shows any disciplinary history. The local Better Business Bureau is another place to check, as is the Certified Financial Planner Board of Standards in Denver.

Ask if a planner is fee-only, charges commissions, or both. Standard annual fees can run 1 percent of your portfolio - $1,000 on a $100,000 portfolio.

If the planner is fee-only, ask if you also owe broker trading fees and if mutual funds and other investments they recommend have commissions and fees atop what you pay the planner. If a planner is paid by commission, nail down how that commission works to avoid future misunderstandings.

When the goal isn't only to make more money but to keep more of what you make, maybe you don't want to pay a financial planner to devise a life plan and manage your finances. Perhaps you just want a planner who sits down for a few sessions and helps you work out a budget and investment strategy.

In the Toledo area, about 75 planners belong to the Northwest Ohio chapter of the Financial Planning Association. Their backgrounds range from accounting and insurance to legal, stock market, and banking.

Most will have an introductory meeting with prospective clients at no cost, to determine if there's a basis to continue the planning process. Often, the advisers will administer a quiz to gauge risk tolerance, and they may ask questions about financial goals, assets, debts, and obstacles. This is a good time to ask questions of the planner, too.

Several state and national organizations have toll-free numbers and Web sites to help people find a financial planner. Among them are:

  • The Financial Planning Association, which has a list of advisers with the certified financial planner designation -1-800-647-6340; www.fpanet.org. The group offers a 12-page pamphlet, How a Financial Planner Can Help You, and How to Choose the Right One.

  • The National Association of Personal Financial Advisors, which refers consumers to fee-only planners - 1-800-366-2732; www.napfa.org.

  • The Ohio Society of Certified Public Accountants, which has a referral service - 1-800-686-2727; www.mysocietyonline.com.

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