A: You're not alone. Millions of Americans share this dilemma.
It's not easy for the average person to find a financial adviser who is objective, qualified, and affordable. But it isn't impossible.
In addition to looking for a financial planner, you should use your telephone and computer to find out about every social service and discount that might be available to you. Many cities have a department of aging or department for the elderly, which is a good place to start. You should also check the bulletin boards and speak to the staff at local senior centers and public libraries.
Before we get to specifics about locating a good financial adviser, let's fill in the basic background.
Most people are surprised to learn that there's no government license for financial planning. But there isn't.
Anybody can call himself a financial planner -- and every financial salesman does. The advice you get from a salesman isn't necessarily bad -- many salespeople are very knowledgeable -- but it's always part of a sales pitch. You can't expect objective advice from someone whose compensation depends on selling you products.
So it's essential to ask how an adviser is paid. There are two basic forms of compensation:
Some advisers are paid by fees. These can be hourly fees, or pre-determined amounts for specific jobs (like creating a financial plan), or an annual percentage of the assets the adviser manages for you.
Other advisers are paid by commissions; they earn a percentage of the price of the products or investments that you buy from them.
And some advisers earn a combination of fees and commissions. They might charge a flat fee to create an investment plan for you, for example, and then earn commissions by selling you products to implement the plan.
Advisers paid by commission often seem more affordable. One reason is that their commissions are usually invisible: They're added to the price of the product. But there are two good reasons you should prefer to pay fees. First, you won't have to wonder if the adviser is recommending something that's better for his finances than it is for yours. And second, you'll know exactly what you're paying for the advice. Invisible commissions are sometimes much much higher than people realize.
What about the adviser's qualifications?
Look for a Certified Financial Planner. The CFP designation isn't a government license. But a CFP must pass a comprehensive two-day exam and meet a continuing education requirement, and has agreed to abide by a written code of ethics.
In brief: for unbiased, reliable advice, you should look for a fee-only CFP.
And that's a problem for the average consumer. Most fee-only CFPs are investment managers; many won't take a client unless he is bringing them a few million dollars to manage.
But most people don't need a money manager. They need the equivalent of a financial check-up: a consultation with an expert who charges an hourly fee for knowledgeable, objective advice that they can implement themselves.
And there are some CFPs who specialize in doing just that: Their clients are people in need of expert advice to help them make difficult financial decisions, and/or periodic check-ups to make sure they're on the right track.
Many of these advisers are members of the Garrett Planning Network (GNP), a nationwide network of independent, fee-only financial planners established by Sheryl D. Garrett, a Shawnee, Kansas adviser.
GNP members are generalist financial planners; but they come from a wide range of backgrounds, including tax accountancy and insurance as well as investment management. You'll find a map to help you locate GNP members in your area here. (The GNP site lists advisers geographically, and by different types of expertise, including college, tax, retirement, and divorce planning, employee benefits, and corporate severance plans.)
On average, GNP advisers charge about $175 an hour; but depending on their background, credentials, and location, their hourly fees can range from $100 to $360.
In most cases, they ask prospective clients to fill out a questionnaire and come in for a free 30 to 45 minute `get acquainted' meeting. That gives you a chance to explain what you're looking for, find out what the adviser can do for you, and ask how much it will cost, before you commit yourself to anything. It also gives you a chance to get a sense of whether you can work with this person.
Don't underestimate how important that is. It's essential that you feel comfortable. If you think you'd feel foolish asking questions, or pushing for a more detailed explanation, this isn't the right person for you no matter how expert he seems.
You don't have to make an immediate decision. Hiring someone to give you financial advice is a serious matter, and you're entitled to take your time. (If you feel awkward about this, say you promised not to commit yourself before discussing the matter with your son, daughter, or best friend.)
Finally, when you hire any adviser, it's a good idea to ask for an engagement letter that spells out the services he'll provide and what they'll cost. This letter tells you what to expect -- and it protects both of you from misunderstandings.
Note to Readers: My article about strategies that can boost your Social Security income in the Sept/Oct issue of AARP Magazine has drawn a great many questions. I'll be addressing those questions here in the coming days and weeks. Meantime, you can read the article here. And you'll find my AARP Magazine article about how to push the reset button on Social Security if you regret having taken it early here.
(c) Lynn Brenner, All Rights Reserved