Finding the RIGHT PRO
 

Advice: Start the year by making sure you get the best possible financial help. 

Like many young couples, Ben and Carrie Edwards wanted a sound plan to serve as the cornerstone of their financial future—a future that might someday include children and would certainly one day include retirement. 

“We wanted good advice, but we didn’t have a lot of money or a lot of assets,” says Ben, a 27 year old software engineer in Kansas City, MO.

Bob Rathert, 64, a retired Anheuser -Busch executive in Williamsburg, Va., has plenty of assets and a lot of acumen. But turning a nest egg that consisted mostly of his employer’s stock into a diversified and dependable retirement portfolio has at times been a feat of financial alchemy.

Rathert and Edwards solved their money problems the same way-by calling in professionals.  Whether driven by a life event, such as marriage or retirement, or simply by the realization that successful investing isn’t as easy as it once seemed, people of both modest and pricely means are seeking out experts to help meet their financial goals.  The good news is that more advice is available to more investors than ever before. That’s the bad news, too. Sorting out the choices is daunting.

Shocking but true: Just about anyone can hang out a shingle and call himself or herself a financial planner. Professional designations indicate a measure of training and experience. But how do you distinguish between them? And how do you know what to pay when compensation schemes are all over the Map? “Many investors turn over money to the wrong people,” says Jack Waymire, author of Who’s Watching Your Money? (John Wiley & Sons, $24.95). “You can’t just go to the Yellow Pages and lookup quality adviser.” Maybe not. But we’ll guide you through the maze and, in the end, give you an idea of how to spot the real thing: a quality adviser.

 
THE GENERALIST
You first order of business is to decide what level of service you want. If you seek a basic road map for your family’s fiscal journey, then you’ll want a financial planer. These generalists should be able to tackle almost any money question you have, whether it’s household budgeting, investing for college and retirement, long-term-care and disability insurance, or tax strategies. A certified financial planner (CFP) has completed a course of study and passed an exam on the financial-planning basics, has at least three years of experience and must adhere to a code of ethics. Credentials that reflect similar training are chartered financial consultant (ChFC), in the insurance industry, and personal financial specialist (PRS), in accounting.  Or you may prefer someone to help you solely with investments. Such market mavens-whether they’re financial planners, stockbrokers, bankers or money managers-may just steer you toward investments, or they may manage your portfolio themselves or farm out your assets to managers whom they supervise.  An investment-savvy designation to look for is chartered financial analyst (CFA), for a person who is trained in economics, financial accounting and portfolio management.

With more than 650,000 financial advisers in the U.S., finding an adviser is far less of a problem that finding a first-rate one. Friends and family are good sources of recommendations, especially if their monetary circumstances are similar to yours. Other professionals familiar with your finances-accountants, lawyers, insurance agents, may know an adviser suited to your situation.

The Internet can also be a good starting point. A few online registries will winnow the field for you. Advisers in a registry administered by Paladin Investors Resources, founded by author Waymire, do not pay to be listed and must meet exacting standards Of 10,000 advisers screened; only 500 so far have made the cut. All 500 derive some or all of their compensation from fees and have an average of 14 years of experience; 72% have multiple certifications. A fee of $149 gives you access to the registry, at www.paladininvestors.com, for 60 days.

There are two professional associations. The National Association of Personal Financial Advisors (www.napfa.org) is a registry of fee-for-service financial planners. The Financial Planning Association (www.fpanet.org) is the largest planning association, with 29,000 members. The Garrett Planning Network (www.garettplanningnetwork.com)is a nationwide network of advisers for the budget-mined.

 
THE COST OF ADVICE
Vetting Potential Advisers is paramount, starting with how you’ll pay the tab. You may be most comfortable with an adviser who charges a fee rather than someone who sells commission-generating products. Some fee-based advisers are paid by the hour or by the job; others charge an annual retainer or a percentage of the assets they manage. You shouldn’t automatically rule out an adviser who works on commission, but that kind of compensation poses potential conflicts of interest. An unscrupulous adviser might be tempted to trade a lot in order to earn the commission, or sell in-house products when others might be cheaper or more appropriate. Advisers should disclose those conflicts and provide a persuasive explanation of why you might need a particular commission-generating product.

Consider, for instance, the way Shari Miller does business. The La Jolla, Cal, Financial adviser charges a combination of fees and commissions. Miller and her partner, Michael Dorvillier, both of whom are licensed by the National Association of Securities Dealers, might have been called stockbrokers in years past. Miller has worked for 12 years with LPL Financial Services, an independent brokerage firm with more than 5,500 reps nationwide. Because LPL doesn’t have its own product line, Miller and Dorvillier are free to suggest any securities or mutual funds they choose.

Whatever the recommendations, says Miller, “I make sure clients understand what they’re buying and how much they’re paying”. Clients pay 1.75% to 2% of assets for ongoing market advice and investment recommendations, or commissions of 1% to 2% for stock and bond trades and up to 3.5% when purchasing funds. Though do-it-yourselfers can definitely invest more cheaply using no-load funds and discount brokers, LL’s prices fall within the range charged by financial professionals and full-service brokers who are paid for their advice.

There’s an adviser to fit every pocketbook. The Edwards’s adviser, Kristine McKinley, of Beacon Financial Advisors, in Lee’s Summit, Mo, is one of a new breed of planners who offers affordable advice to the less-than-affluent. Many planners require a minimum net worth and charge$3,000 to $5,000 for an initial plan, plus up to $300 an hour for consultation. McKinley, who is a CFP as well as a certified public accountant, will counsel anyone for $150 an hour. So far, the Edwards have paid less than $1000 for three consultations, addressing such questions as which funds to pick in their employers’ retirement plans and how to budget for the arrival of children.

Jane Bertsch, 59, signed on with Detroit-based Cambridge Advisors in 1999. For $5,000, she received an initial review, which included an evaluation of her investments, assistance in drawing up a will and tax planning. Three years later, Bertsch lost her patient-relations job with a group of hospitals. But her $2,000 annual retainer entitled her to advice from lawyers and MBA Bert Whitehead, Cambridge’s founder, and his staff, who weighed in on whether Bertsch should take her pension early or wait, how she should pay income taxes based on her newly self-employed status and how she might restructure her $250,000 fund portfolio. Meetings are schedule quarterly, but, say Bertsch, “if I were to decide to buy a new car, I’d call and ask whether I should buy or lease. They’re always available.”

In fact, advisers who share Whitehead’s philosophy are available in more than 25 states through the Alliance of Cambridge Advisors, a network of about 150 planners. Clients can choose, like Bertsch, to pay an annual retainer for ongoing advice, or pay a one-time fee ranging from about $500 to $900 for a financial “tune up” to address just two or three issues.  At the other end of the advising spectrum are “wealth advisers,” such as Joe Montgomery, head of the Optimal Service Group, in Williamsburg, VA, a unit of Wachovia Securities. A CFP, Montgomery has been advising Rathert, the retired executive, since Gerald Ford was in the White House. One of the biggest challenges has been maximizing the value of Rathert’s Anheuser-Busch options without risking everything on a single company’s stock. Montgomery hedged the portfolio with complex strategies using the options. Today, Rathert says, his account is worth more than $5 million and “diversified six ways to Sunday.”

Montgomery’s wealth-management team of 11 sets strategy, then divvies up assets among various money managers. Fees are based on assets held with the firm, typically ranging from 0.5% for an all- bond portfolio to 1% to 1.5% for a stock portfolio. Rathert pays Optimal 0.5% annually, or at least $25,000.

Questions To ASK
Most Advisers will schedule a free initial meeting, during which you should clarify the services they will provide and how you will be charged.  Alex Booras, 71, a retired business owner in Plano, TX, interviewed three planners before settling on JWA Financial Group in 2002. Booras was impressed by the group’s thoroughness and its emphasis on low-cost funds. “They had an exhaustive policy statement- about 20 pages- and they brought up things that I hadn’t even thought of, “says Booras.

A brochure on Napfa’s Website, “How to Choose a Financial Planner,” can help prepare you for an adviser interview. Among the suggested questions: Are there financial incentives for you to recommend certain products? Do you provide a comprehensive written analysis’s of my financial situation and recommendations? Do you take custody of, or have access to, my assets? Ask for a written promise that the adviser will act as a fiduciary, which means the adviser will work in your best interest.

Let the government help you, too. Advisers who manage clients’ money (or the firms they work for) are registered investment advisers and must file document with the Securities and Exchange Commission or with state regulators. Registration is not a stamp of approval, but a Form ADV (for adviser) is a mini background check, replete with the adviser’s educational background, professional experience, method of compensation – and disciplinary information. Any reputable adviser will make the form available to you without your even having to ask.

Mutual fund investors may be able to find an adviser at their fund company. Counselors employed by Fidelity Investments, for instance, will manage a handpicked selection of Fidelity and non-Fidelity funds for clients with at least $50,000 under management. For clients with $300,000 or more, Fidelity provides a more sophisticated service that incorporates funds and certain stocks, with an eye to each client’s tax situation. Fees range from 0.3% of assets to1.11%. An adviser at Vanguard Group will recommend a portfolio of in-house funds suited to your goals for a fee of $1,500 ($1,000 if you’re already a customer). Clients with $500,000 or more can get an adviser to manage their funds (Vanguard and non-Vanguard), stocks and bonds. Fees start at 0.75% of assets for accounts of less than $1 million and fall as account balances rise (see “Vanguard Wants ALL of You”, Oct.).

CALLING A SPECIALIST
Some money dilemmas beg for the brainpower of an expert. A tax specialist can make sense of a sudden windfall (see “Bonus Babies,” Dec.), for example, or an insurance agent can structure life-insurance contracts that allow small-business partners to buy each other out in the event of death or disability.

Or consider that estate-planning conundrum that challenged one New Jersey couple with three grown children. With one son in the priesthood, the parents wanted to make sure that his share of their estate would be preserved for him without violating his vow of poverty. So the family called Martin Shenkman, an estate lawyer in Teaneck, N.J.  Shenkman solved the problem by devising a unique trust. It enables the priest to use the money for things that are permitted by the Church but not provide for- such as a study trip to the Holy Land.

Again, referrals from people who've been in similar situations are your best bet for finding the right specialist. Most professionals charge by the hour, so organizing your thoughts and documents ahead of time can pay off. Make sure the specialist is willing to consult with your other advisers. “The only effective way to do financial, investment, tax and estate plans is to-do them together,” Says Shenkman. If you don’t have the clout to assemble and august group of experts around a table, a15-minute conference call a few times a year should do the trick.

Whether you work with a cadre of experts or only one, you should get more that just well-managed money. With a skilled adviser on your side, you should sleep like a baby.