Picking the Right Planner...

Working single mom Kathy A. Gambrell has had no problem finding a lawyer to write her will or a certified public accountant to prepare her taxes -- professionals she found by asking friends and family for recommendations.

But a four-year quest to find a financial planner has left the editor of the District-based CongressDaily baffled, angry and, worst of all, unenlightened on how to find someone good to help her manage her money. Three weeks ago, she fired her latest adviser after he recommended she quit her job, fire her babysitter and yank her child from Montessori school -- then let him manage the money she would save, along with a small inheritance she's about to receive.

"As if!" says Gambrell, 46. "He had no idea what I was about."

This sounds far too familiar! We hear horror stories like this constantly from our clients. How can you find a planner that is out there for you and not for his own commissions! How do you know if the person is reliable? What are his/her qualifications? The list goes on and on and on and this article does a great job tackling the issues. Let's look at it some more!

Much of what makes hiring a financial planner so bewildering is the motley nature of the industry. There are more than 80 certifications or degrees advisers can place next to their names. Most were created since the 1980s, when financial planning came into its own, but only a few carry widespread recognition.

"It's a joke," says Ellen Turf, chief executive of the National Association of Personal Financial Advisors, an industry trade group. "Our goal is to have financial planning be a profession, but it's not quite there yet. We don't have a system like doctors or lawyers or accountants, where you know what to look for."

The absence of a uniform industry standard means that consumers must do their homework before they hire anyone. Experts say it is essential to know whether a prospective adviser accepts commissions that could influence which products he recommends. And equally important: Consumers should also ask whether that adviser is the kind that by law must put his client's profit ahead of his own. And consumers should check with federal and state regulators to see if that adviser has registered and whether he has been the subject of any recent complaints or disciplinary actions.

Can you believe that? For something that is so important, there is little organization. No wonder it is nearly impossible to find a reliable financial advisor! It gets even MORE confusing as we look further. Get a load of this next part!

As consumers wade through lists of prospective advisers, they will encounter many professional credentials. Three of the best-known designations are certified financial planner, or CFP; certified public accountant/personal financial specialist, or CPA/PFS; and chartered financial consultant, or ChFC.

Each of these credentials requires its bearer to complete an approved course of financial-planning studies, pass a certification exam and attain a minimum level of experience. But these designations, just as in any other profession, don't guarantee that someone is good or will act with your best financial interest in mind, consumer groups and government financial regulators caution.

As they look for a planner, consumers should remember two key legal designations created by the federal government. The first is that of registered investment adviser . With one important exception, this is anyone who charges money for giving advice on which securities to buy or sell. They must file as a registered investment adviser with state or federal securities regulators, and by law they are what is known as a "fiduciary." A fiduciary can recommend only those investments she believes are in your best interest -- even if she might make more money by selling you something else.

The second legal designation is that of stock broker , which the law defines as anyone who buys or sells securities for someone else. In general, brokers are not fiduciaries. They don't have to recommend a product that is best for an investor -- only one that is suitable. For example, three mutual funds might be suitable for you, given your investment goals and tolerance for risk. A broker could legally steer you to the one that will pay him a higher commission, even if its returns have not been as good as the other two.

To further confuse things, an adviser can be both a registered stock broker and a registered investment adviser. That means he or she could apply different standards at different points in your relationship, at times acting as a fiduciary recommending a mutual fund that will give you the best return, at others acting as a broker, recommending a fund that's suitable but perhaps a bit riskier.

An additional wrinkle was added last year, when the Securities and Exchange Commission decided to allow stock brokers, who traditionally have been paid with commissions and have given limited investment advice, to perform those same functions for a fee, without having to become fiduciaries by registering as investment advisers.

That decision angered many registered advisers, who argue that the policy allows brokers to appear to offer unbiased advice without in fact having to act in a consumer's best interest. One trade association, the Financial Planning Association, has sued the SEC over the issue.

Federal regulators, acknowledging the potential for confusion, require these fee-paid brokers to disclose potential conflicts of interest to customers. But a recent study by the SEC found that customers often don't understand such disclosures. The agency plans a larger study before it decides what to do next.

To cut through the clutter, Barbara Roper of the nonprofit Consumer Federation of America recommends that people hire a registered investment adviser. It provides an extra level of probability that the person will act in your best interest, she says.

Wow! Again, how do they expect the average joe to find what and whom he needs? Answer, they don't! You're dead meat if you go into this blind.

This next part is something that we discuss constantly and is the big reason why you just can't trust so many of the so-called 'financial advisors.'

Advisers can be paid with fees, commissions or a combination of both. Someone paid by commission -- for example, by a mutual fund or an insurance company -- is acting as a salesman. Someone paid only a fee is acting more like a lawyer, charging you for his time and expertise; he will not make more money by steering you towards one product over another.

The commission system still appeals to many consumers who can't afford or don't want to pay upfront fees, says Robert E. Plaze, associate director in the SEC's Division of Investment Management. But clearly, experts say, the popularity of fee-based services is growing.

In the past, fee-only planners tended to cater to wealthier clients, charging a rate that was a percentage of assets, usually about 1 percent a year. Clients often had to have assets of $1 million or more.

BINGO! There you have it. Most of the advisors that are available to the average person make a commission. Because they are making a commission they are NOT working on your behalf!

That is one area that we focus heavily on, teaching you how to invest. We'll never tell you what to invest in. We'll never give you a 'hot' stock tip. We won't tell you which companies to use or not use. What we will do is give you the knowledge needed to make your own, intelligent decisions.

Now, take a deep breath, go out and have a great and abundant day! Give us a call if you'd like, we'd love to talk with you!