(Published Aug. 22, 2007, 3:02 p.m.)
If you're like most people, you probably have many questions and concerns about retirement-managing health-care expenses, ensuring that your income lasts your lifetime and caring for your loved ones after you're gone.
It's a lot to think about. Just as you wouldn't build a house without a blueprint, you shouldn't prepare for your post-employment years without a plan. Whether you're looking at decades before that happens, or whether the big day is coming soon, you should have someone help you see and evaluate the big picture.
Choosing a financial planner or adviser may be one of the most important decisions you make for yourself and your loved ones. Financial planners can provide you and your family with guidance over your lifetime, or work with you to address specific concerns as needed.
An adviser can play a central role in helping you meet your life goals and achieve financial well-being. Consequently, taking the time to select a financial planner or adviser who is both competent and trustworthy, one on whom you can depend for professional advice and services is a very serious matter. Your future depends on the choices you make now. The following information is intended to help you choose wisely.
n Credentials: Make sure the planner or adviser has financial expertise. Ask about years of experience, college degrees and certifications. A CFP (certified financial planner) is the best for planners. For advisers, ask if they are RIAs (registered investment advisers) or IARs (investment adviser representatives). RIAs own their own firms, while IARs are independent contractors or are employed by an RIA.
n Ethics: When interviewing potential advisers or planners, ask for their CRD (central registry depository) numbers. You can then visit NASD.org, enter the CRD number and check your potential adviser's compliance records. Check also for client complaints and disciplinary actions from your state's securities and insurance commissioners. Because convicted criminals can obtain securities licenses you should also check criminal records. Finally, ask if the planner is willing to provide a full written disclosure indicating all of his or her compensation and potential conflicts of interest.
n Business practices: Assess how the adviser is paid; the variety of products and services offered typically determines whether an adviser is paid through commission or fee. Fee-only investment managers are independent, working without commission; therefore, it's in their best interests to choose suitable investments for their clients. Fee-based advisers and planners answer to you and often provide a greater level of investment advice and planning than do commission-based brokers.
If you pay commissions, you generally are charged a percentage of the purchase or sale price for each transaction. Most major, full-service brokerages derive most of their profits by charging commissions on client transactions. Commissions on trades aren't the only costs associated with brokerage accounts. Some firms charge an annual maintenance fee, and some charge a fee if the value of an account dips below a certain level. There is potential for a conflict of interest to develop between brokerages that charge commissions and their clients. Because commission-compensated brokers will not get paid very much if their clients seldom conduct transactions, unethical brokers may encourage clients to make more trades than necessary.
n Referrals: Seek personal and professional referrals from friends or family members, your attorney or accountant.
n Educate yourself: Attend investment seminars held in your community. Read books or articles about money management and/or investment strategies, or consult free investment brochures.
After you are familiar with the basics you may feel ready to move forward with investing. If you want help selecting investments that are right for you, remember that today the services of investment planners and advisers are available to every level of investor. Among other things, an investment professional can help you:
n Work toward your goals. The professional will learn about your financial goals and help you create an investing strategy designed specifically to meet them.
n Choose investments that are right for you. Professionals understand the overwhelming number of investing options out there and can help you choose ones that are right for you and your dependents.
n Establish the right asset allocation. Your investment professional will help you figure out what asset allocation suits both your goals and risk tolerance.
n Invest through changing market conditions. An investment professional can help you understand how changing conditions affect your portfolio, and will help you react wisely to market changes-to avoid buying in a "hot market" or selling in a panic.
n Save time and energy. If you're like most people, you're busy. You don't have the time, desire or expertise to closely monitor the market and the available investments. An investment professional is trained to do these things, giving you more free time to spend on other areas of your life.
Nothing could be more personal to you than the way you invest. The financial adviser you choose should be as attuned to your personal hopes, dreams and goals as to your financial information. He or she needs to be accessible for conversations and reviews, whether they're annual, semi-annual, or as needed. Your adviser should be experienced and well versed with the types of investments you are interested in pursuing, as well as your investment objectives and risk tolerance. Finally, get everything in writing before hiring an adviser or planner. Verbal agreements are too easy to deny later.
So, what is the difference between a financial planner and a financial adviser? A financial planner is an individual who helps you create a road map for your financial future. The planner works with the client to format retirement, tax and college plans according to the client's immediate and/or future needs. A financial adviser, on the other hand, deals specifically with investing. The adviser guides you in investing your money in accordance with the plan you created. Both areas require a high degree of specialized knowledge, and some financial professionals are qualified to provide both services.
McSherry Anderson, Walworth County's fee-only portfolio management and financial planning firm, can provide both services and tailor them to your needs. They draw on more than 40 years' experience to provide guidance in helping you develop a financial plan and find a broad range of solutions to meet your needs. To find out how the McSherry Anderson team can assist you in your investment planning needs call their Lake Geneva office at (800) 998-1013.
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