How to Pick the Right Planner

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Mary Rowland

Decision Center

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Financial Planning: What's In It For You?

If a friend had asked me five years ago whether he needed a financial planner, I would have said, "Probably not."

Today I would argue that virtually every American could have a better quality of life and perhaps even a happier one with the help of a good planner.

What changed in five short years? Planners changed for one thing. Today there are lots of good ones. But I suspect my notion of a planner's value to a person's life has changed even more than the planners themselves. My education came about largely as the result of a book that I wrote last year.

To research the book, I identified 55 of the top planners in the country and talked with them about their business. I learned a lot. Sure planners know about how to identify insurance needs and pick investments. But that's not the hard stuff. You could do that yourself with the help of a good software program.

But there are at least two things that financial planners do for their clients that a software program cannot do. The first is handholding, a need I had entirely overlooked. It's easy enough to tell an investor that he should have a portion of his investments - say 60 to 75 percent - in stocks for growth. But some people simply can't do it. It's an emotional thing.

Let me give you an example. I was talking to a friend who is a highly-educated money manager. She told me that she had missed the entire 15-year bull market in stocks because her husband, a Ph.D. arts consultant, was terrified of the stock market. He simply couldn't bring himself to put a penny into it.

My friend's employer had provided her with a financial planner as an executive perk. The planner had been working on her husband for five years, patiently explaining to him how the market works and why it makes sense as an investment. Finally, at the beginning of 1997, my friend's husband agreed to begin investing in the stock market.

Did my friend need a financial planner? Absolutely. Certainly the planner had no more technical knowledge than she had - probably less. But he persuaded her husband to get into the market. And he will continue to earn his fee by making certain that the husband doesn't panic and move out in a market slump.

The second crucial thing a good planner does is to identify your dreams and help you reach for them. The top planners do not focus strictly on dollars and cents like an accountant searching for a place to save 50 cents on your tax bill. And thank goodness. That's the very thing that makes financial planning unappealing to most of us - all this tedious talk of budgeting. A good financial planner is interested in you as a person. He is an excellent listener. He wants to know about your job, your family and the kind of life you want. And he wants to help you achieve it.

When my book came out, I got a call from a Ann Perry, the personal finance columnist for the San Diego Tribune, who was writing a column on picking a planner. She confided that she used a financial planner and that the planner had helped her and her husband see that what they really wanted was a new house.

"That focused our thinking; we saved our money and did it," she said. Her family was thrilled about the move and on closing day, she called her planner. "He was the only person I could call to say how happy I was," the columnist recalled.

Surely she could have bought a house on her own. But perhaps she would never have identified a new house as a dream. Good planners know how to pinpoint our dreams and help us implement them.

"What would you most regret not having done if you died tomorrow?" is the first question one Boston planner asks a new client.

Of course, not all people who call themselves financial planners are going to do this for you. It is still an unregulated profession and anyone can call himself a financial planner. I can. So can you. So how do you pick a good one?

Over the past several years, the National Association of Personal Financial Advisors (NAPFA), based in Buffalo Grove, Ill., has emerged in the press as the elite group. That's largely because of its strict admission requirements, conflict of interest policies and practice of accepting only those members who earn no income from commissions. Members are "fee-only" planners.

NAPFA has created considerable controversy - and animosity - largely because some zealous members have suggested that NAPFA members alone are on the high road. That has been a turn off for me in the past. But the research I've done in financial planning has persuaded me that it's a good place to go for leads. I'm sure that not every NAPFA member is a great planner. But many of the outstanding planners I worked with are NAPFA members.

Ask your accountant, attorney and other financial professionals for leads, too. You should collect a list of three planners to interview. Here are some things to keep in mind.

Be wary of the sales mentality. Top planners are interested in helping you accomplish your goals, not in selling a product. I would be suspicious of anyone who tried to sell me something in the first meeting. Some top planners won't even begin investing until they've been working with a client for six months.

Look for the certified financial planner CFP designation. Over the past couple of years, this has emerged as the most meaningful of a group of also-rans. When I said this in my book, I got a letter from a top planner in New York City who is also head of the American Institute of Certified Public Accountants. He pointed out that many fine accountants who become planners choose the AICPA's personal financial specialist designation. That's true enough. But I still think CFP is best.

Search for a good listener and a good teacher. Virtually all the planners I worked with had some connection to teaching - whether it was teaching children, investors or other financial advisers. Teaching helps them to learn themselves and to translate the jargon into language that you can understand.

Ask the planners you interview if they consider themselves fiduciaries. That is simply a legal way of saying that they put the client's interest first. The best planners embrace it.

Find out about conflicts of interest that the planner may have. Everyone has them. For example, many planners are paid based on the assets they manage for you. If a planner suggests that you use some investment assets to pay off credit card debt, his fee will be lower. It presents an obvious conflict and a good planner will acknowledge that.

Look for planners who specialize in either your career path or lifestyle choice. If your top goal is retirement planning, look for a planner who says that's one of his or her areas of expertise.

Take a careful look at your own expectations. The top planners are not interested in working with greedy, troubled clients. They want to work with clients who are open and enthusiastic. In fact, greed and unrealistic expectations were the top complaints planners made about clients. Planners say that nine clients out of 10 start out by asking about investment performance. But after they're on board, they realize that what they value is a good working relationship.

It's a relationship that you really want. So don't be a performance pig. Indeed, be suspicious of a planner who promises to beat the S&P 500. Good planners invest in a portfolio of diversified securities - including international stocks and bonds - with the goal of reducing volatility. When the U.S. market beats all comers as it has in the past few years, a good planner will lag the S&P. And he'll freely admit it.

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			INVESTING

			How to Pick the Right Planner Mary Rowland Decision Center

	.......................................... BACK TO MAIN Financial Planning: What's In It For You?		If a friend had asked me five years ago whether he needed a financial planner, I would have said, "Probably not." Today I would argue that virtually every American could have a better quality of life and perhaps even a happier one with the help of a good planner. What changed in five short years? Planners changed for one thing. Today there are lots of good ones. But I suspect my notion of a planner's value to a person's life has changed even more than the planners themselves. My education came about largely as the result of a book that I wrote last year. To research the book, I identified 55 of the top planners in the country and talked with them about their business. I learned a lot. Sure planners know about how to identify insurance needs and pick investments. But that's not the hard stuff. You could do that yourself with the help of a good software program. Someone to hold your hand But there are at least two things that financial planners do for their clients that a software program cannot do. The first is handholding, a need I had entirely overlooked. It's easy enough to tell an investor that he should have a portion of his investments - say 60 to 75 percent - in stocks for growth. But some people simply can't do it. It's an emotional thing. Let me give you an example. I was talking to a friend who is a highly-educated money manager. She told me that she had missed the entire 15-year bull market in stocks because her husband, a Ph.D. arts consultant, was terrified of the stock market. He simply couldn't bring himself to put a penny into it. My friend's employer had provided her with a financial planner as an executive perk. The planner had been working on her husband for five years, patiently explaining to him how the market works and why it makes sense as an investment. Finally, at the beginning of 1997, my friend's husband agreed to begin investing in the stock market. Did my friend need a financial planner? Absolutely. Certainly the planner had no more technical knowledge than she had - probably less. But he persuaded her husband to get into the market. And he will continue to earn his fee by making certain that the husband doesn't panic and move out in a market slump. Pinpointing your dreams The second crucial thing a good planner does is to identify your dreams and help you reach for them. The top planners do not focus strictly on dollars and cents like an accountant searching for a place to save 50 cents on your tax bill. And thank goodness. That's the very thing that makes financial planning unappealing to most of us - all this tedious talk of budgeting. A good financial planner is interested in you as a person. He is an excellent listener. He wants to know about your job, your family and the kind of life you want. And he wants to help you achieve it. When my book came out, I got a call from a Ann Perry, the personal finance columnist for the San Diego Tribune, who was writing a column on picking a planner. She confided that she used a financial planner and that the planner had helped her and her husband see that what they really wanted was a new house. "That focused our thinking; we saved our money and did it," she said. Her family was thrilled about the move and on closing day, she called her planner. "He was the only person I could call to say how happy I was," the columnist recalled. Surely she could have bought a house on her own. But perhaps she would never have identified a new house as a dream. Good planners know how to pinpoint our dreams and help us implement them. "What would you most regret not having done if you died tomorrow?" is the first question one Boston planner asks a new client. Picking a planner Of course, not all people who call themselves financial planners are going to do this for you. It is still an unregulated profession and anyone can call himself a financial planner. I can. So can you. So how do you pick a good one? Over the past several years, the National Association of Personal Financial Advisors (NAPFA), based in Buffalo Grove, Ill., has emerged in the press as the elite group. That's largely because of its strict admission requirements, conflict of interest policies and practice of accepting only those members who earn no income from commissions. Members are "fee-only" planners. NAPFA has created considerable controversy - and animosity - largely because some zealous members have suggested that NAPFA members alone are on the high road. That has been a turn off for me in the past. But the research I've done in financial planning has persuaded me that it's a good place to go for leads. I'm sure that not every NAPFA member is a great planner. But many of the outstanding planners I worked with are NAPFA members. What to ask your potential planner Ask your accountant, attorney and other financial professionals for leads, too. You should collect a list of three planners to interview. Here are some things to keep in mind. 1. Be wary of the sales mentality. Top planners are interested in helping you accomplish your goals, not in selling a product. I would be suspicious of anyone who tried to sell me something in the first meeting. Some top planners won't even begin investing until they've been working with a client for six months. 2. Look for the certified financial planner CFP designation. Over the past couple of years, this has emerged as the most meaningful of a group of also-rans. When I said this in my book, I got a letter from a top planner in New York City who is also head of the American Institute of Certified Public Accountants. He pointed out that many fine accountants who become planners choose the AICPA's personal financial specialist designation. That's true enough. But I still think CFP is best. 3. Search for a good listener and a good teacher. Virtually all the planners I worked with had some connection to teaching - whether it was teaching children, investors or other financial advisers. Teaching helps them to learn themselves and to translate the jargon into language that you can understand. 4. Ask the planners you interview if they consider themselves fiduciaries. That is simply a legal way of saying that they put the client's interest first. The best planners embrace it. 5. Find out about conflicts of interest that the planner may have. Everyone has them. For example, many planners are paid based on the assets they manage for you. If a planner suggests that you use some investment assets to pay off credit card debt, his fee will be lower. It presents an obvious conflict and a good planner will acknowledge that. 6. Look for planners who specialize in either your career path or lifestyle choice. If your top goal is retirement planning, look for a planner who says that's one of his or her areas of expertise. 7. Take a careful look at your own expectations. The top planners are not interested in working with greedy, troubled clients. They want to work with clients who are open and enthusiastic. In fact, greed and unrealistic expectations were the top complaints planners made about clients. Planners say that nine clients out of 10 start out by asking about investment performance. But after they're on board, they realize that what they value is a good working relationship. It's a relationship that you really want. So don't be a performance pig. Indeed, be suspicious of a planner who promises to beat the S&P 500. Good planners invest in a portfolio of diversified securities - including international stocks and bonds - with the goal of reducing volatility. When the U.S. market beats all comers as it has in the past few years, a good planner will lag the S&P. And he'll freely admit it.