A little research goes a long way in choosing a financial planner

Published on Monday, June 16, 2008

A little research goes a long way in choosing a financial planner
What to look for
How are they paid?
Track record
By JENNIFER KAIN DEFOE
Published: February 12, 2008
When hiring a financial planner, here are some questions to ask: - Does the planner have any professional certifications?

- Has he or she been in the business for a long time?

- Are the planners new to the community, or have they been established in the area?

- How does the planner make his or her money? Do they charge you a fee, or gain money from the investments to which they steer you?

- Do you know anyone who can provide a

referral, perhaps your lawyer or tax accountant?

- Do they have professional references?

- Are they willing to meet with you before you make your decision?

Paying off debt and saving money are two of the most popular New Year's resolutions in this country. It's right up there with losing weight and quitting smoking.

As all those year-end W-2 forms and 1099s start showing up in the mailbox, along with bloated credit card statements from the holidays, it might just be time to make an appointment with a financial planner.

With the volume of information available on the Internet and the proliferation of Internet banks, why bother paying someone to manage your money when it seems like you can do it yourself?

Perhaps, more importantly, how do you find a financial adviser you can trust? Someone whose primary concern is fattening up your portfolio, not their own?

Financial planners work to make sure clients are either saving enough to retire comfortably, or that those who are already retired won't run out of money too quickly.

This involves not only having knowledge of the stock market, but in-depth knowledge of ways to provide the diversification required for long-term stability. Planners must also know about the constantly changing tax and estate laws. This is stuff they don't teach on eTrade.

Debbie Kane, a registered investment adviser with Drake, Saunders & Diwinsky in South Orleans, succinctly summed up the "why" in hiring a financial planner.

"You wouldn't operate on yourself, you'd leave it to a surgeon," she said.

Various certifications - such as Registered Investment Adviser (RIA), Registered Financial Consultant (RFC), and Certified Financial Planner (CFP) - that are held by financial planners require "a lot of continuing education to be licensed every year," according to Kane.

Brian Drake, owner of the South Orleans firm, said "You can go on ING or eTrade and you have access to just as much info as I do "¦ but people don't want to bother."

Beside the need for knowledge, working with a financial professional can keep people from getting too emotionally involved with their financial decisions.

Drake explained that part of what financial advisers do is provide emotional discipline.

"I have a client who doesn't like the market and when it starts going down, he'll get nervous and call me, wanting to sell, and each time it's been the bottom of the market," he said. "My job is to say 'calm down.'"

Matt Keeling, a certified financial planner with Keeling Financial Strategies in Mashpee, agrees.

"A lot of times, people lose perspective over the stock market and what it means to them when it may not mean anything to their retirement "¦ and having a financial adviser is like having someone to check that behavior," he said.

Financial planners are in the business of making their clients money, but they also need to make money for themselves.

Their money comes either from fees ($100-$350 per hour) charged directly to the client, commissions paid by the funds or insurance companies where they place a client's money, or a combination of the two, according to Thomas Orecchio, chairperson of the National Association of Personal Financial Advisors.

Finding someone you can actually trust with, gulp, all of your money, is tough.

Those certifications, RIA, RFC and CFP, do mean something:

They require financial planners to be up on the constantly changing tax and estate laws, Kane said.

And there are the organizations, such as NAPFA, that monitor members.

"We believe we hold our members to the highest standards in the industry with respect to compensation, credentials, peer review and continuing education," Orecchio said.

NAPFA, with 2,000 members, is a small organization compared with the Financial Industry Regulatory Authority, which claims it has more than 600,000 members nationwide.

The FINRA Web site, www.finra.org, includes a search tool for finding a financial planner, which both Drake and Keeling recommend. You can find it by clicking on the FINRA BrokerCheck link.

When searching for a financial planner, Keeling also suggests looking for someone with longevity, both in the business and the community.

"They should have some kind of track record, been around for awhile," he said.

While the Cape, with its high population of retirees and second homeowners, seems to have a large number of independent, smaller firms to choose from, there are large institutions that provide financial advice to customers as well.

When it comes to having a track record, Cape Cod Five, in business since 1855, certainly fits that bill.

Joseph Hawley, vice president and business development officer with the Cape Cod Five Trust and Asset Management Division, said working with an adviser in the bank's Wealth Management division brings the stability of that history into the relationship.

"With Cape Cod Five, and other institutions, you have a lot of oversight and regulations," said Hawley.

Asking someone for a referral is one of the most common ways to find a financial adviser. "I think a great way for people who are just starting (to look for a financial planner) is (to) ask their accountant or attorney, someone they're already working with, for a referral," said Hawley.

Keeling sees the bulk of his company's clients coming in through referrals.

"I can't think of one client we didn't get that way in the last three or four years," said Keeling.

Both Hawley and Drake recommend getting references in addition to referrals, meaning ask someone you're thinking of working with for additional names of people the adviser is already working with.

So you've checked the various organizations, you've read up on how who gets paid what, and you've gotten some names from people you trust.

Before you sign on the dotted line, meet with people and see how it goes.

Drake said, "Choosing someone is a matter of who most personally touches you, it's very personal."

"Interview a few people and then go for it," said Keeling. "Hire somebody you get along and work with best."

Hawley said he has found "that people really like to deal with people who genuinely take an interest in their situation, helping them meet their goals."