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the right stuff.

When it comes to selecting an advisor, you have several options. Here's how to make the best choice.

the right stuff

HAVE YOU EVER WONDERED WHAT'S THE BEST WAY TO DIG yourself out of debt, save your hard-earned money or invest for the future? If so, you may need the services of a financial planner. Contrary to popular opinion, financial planners aren't just for wealthy individuals. In fact, experts say that hiring a financial planner has less to do with what you have than with what you want to have.

"Anyone who has financial goals and objectives" but doesn't feel completely comfortable coming up with their own strategies "should hire an advisor," says Elissa Buie, president of the Denver-based Institute of Certified Financial Planners. And at certain critical junctures in life--such as when you're getting married Or starting a family, purchasing a new home or planning for retirement--solid financial advice becomes imperative.

BLACK ENTERPRISE has decided to revisit this subject because it's important to all aspects of your life. (See "Seeking An Investment Advisor," November 1998.) To make the process a little easier, here are some step-by-step guidelines that can help you find the planner who's right for you.


The very first thing to do is obtain a list of potential advisors. Contact professional associations whose members are financial planners. You can call the Institute of Certified Financial Planners (ICFP) at 800-282-PLAN or tap into their Website at The National Association of Personal Financial Advisors (NAPFA), located in Buffalo Grove, Illinois, can be reached at 888-FEE-ONLY or www. To contact the International Association for Financial Planning (IAFP), headquartered in Atlanta, call 800-945-4237 or log on to These organizations will provide you with the names of planners in your area. Individuals with CFP (Certified Financial Planner) after their names have received the highest designation in the profession.

In fact, the CFP designation is viewed as the benchmark in the financial planning industry for several reasons. First of all, the appointment was specifically designed by and for financial planners, and didn't grow out of any other profession, such as accounting, sales or insurance. Additionally, to receive the CFP designation, advisors have to jump through a number of hoops, all of which are designed to ensure a basic level of education, experience and professionalism. To become licensed, they must successfully complete a rigorous examination (which currently has only around a 50% pass rate); sign a code of ethics whereby they promise to abide by the highest standards of conduct; take continuing education classes; and have a minimum of three years' experience in the business.

Still, consumer rights groups warn that professional credentials alone aren't enough to guarantee that you receive sound financial counseling. Experts say that there are good and bad planners with the CFP title--and those without. Therefore, it's up to you to really do your homework.

In addition to securing names from professional organizations, get referrals from colleagues, friends or family members. A personal testimonial from a reliable source can help you during your search.

"If you're just getting started and you're a little nervous, word of mouth from someone you trust and respect is probably the best way to go," says Dwayne Grady, a financial planner with American Express Financial Advisory Services in Wilmington, Delaware.

Grady ought to know: most of his clients--from Washington, D.C., to New Jersey--have come from referrals.

One such client is Darren Comedy, an architect in the nation's capital, who says he's pleased he took the time to hire Grady as his personal financial planner. Darren and his wife, Caren, now have what he calls a "nice game plan" that guides them through everything from investing in stocks and bonds to maintaining the right kind of insurance policies.


Once you've come up with a list of potential financial planners, your next step is to contact them. Ultimately, your task is to weed out those individuals who, for one reason or another, might be unsuitable for you. Whittle down the field by assessing each individual's merits based on background and experience, products and services, and compensation.

Begin your inquiry by asking about the advisor's educational and professional history. Find out where he or she went to school, what degree(s) were earned and, of course, whether the person has any credentials recognized in the industry, such as the CFP or the Chartered Financial Consultant (ChFC) designation.

Find out how long the person has been a financial planner and for which firms he or she has worked. You can request references, although you should be aware that some advisors don't give out the names of their clients because of privacy concerns. Nonetheless, look for someone with a proven track record.

After checking out a planner's education and work history, get an idea of the services the advisor offers. Some merely pitch various investments, while others specialize in just one narrow area of financial planning. Try to avoid both types, except in special circumstances. In general, it's a good idea to seek out advisors who offer a range of services.

Broadly speaking, there are six areas of financial planning:

* Cash management and budgeting

* Insurance services

* Investment planning

* Tax advice

* Retirement planning

* Estate planning

Tukufu Zuberi, Ph.D., a professor of sociology and chairman of the African Studies Center at the University of Pennsylvania, says that kind of detailed, comprehensive financial planning has given him peace of mind. He's gone through the ups and downs of picking a financial planner. Zuberi was solicited by a planner in 1991, and agreed to become a client. All too quickly, however, it became apparent to him that his advisor was irresponsible. "He kept coming to me with all these investment ideas and saying he was going to make my money grow, but they never worked," says Zuberi.

The problem was that the advisor "never wanted to talk to me--except when he wanted to sell me stock," Zuberi recalls. He eventually fired the advisor and went through two more at the same firm before switching companies. Finally, in 1994, he found a planner who suited his needs.

By that time Zuberi had become a tenured faculty member, begun work on a book and pondered the best ways to save for his three kids' college education. Moreover, like many people, he didn't--and still doesn't--have a lot of time and energy to devote to financial planning. `Im very busy with my scholarly activities. But I also need to have downtime," Zuberi says. "And when I come home, I like to talk to my kids and my wife about what happened in their day and not talk about money."

At this point, not talking about money is a luxury, of sorts, for Zuberi. But it's one you can ill afford if you're trying to hire a financial planner. In fact, this is the one area in which you can't mince words during your selection process. Ask advisors to tell you specifically how they expect to be compensated for the services they provide. What are the hourly costs involved? Do they operate on commission? Do they charge a flat fee or get a percentage of the assets they manage? Or is their fee structure based on some combination of these elements?

Take note: when you hire fee-only planners, you don't have to deal with individuals who make commissions selling you specific products. The NAPFA recommends fee-only advisors exclusively. Whatever type of planner you choose, the bottom line is that you need to clearly understand how--and how much--the advisor will charge you. You should also know every way that the planner could possibly make money from you.

Fees are based on several variables, the most important of which is geography. Northeast residents, for instance, should expect to pay more than people living in the Midwest. Aside from location, other factors that can influence fees include the experience of the financial planner you hire, the size of his or her firm and the organization's reputation. Of course, retaining the services of a financial planner from a big-name Wall Street investment bank is likely to cost you more than hiring someone from a smaller, lesser known firm. But rest assured: you can find reputable, diligent professionals at either end of the spectrum. According to ICFP President Buie, who also owns Financial Planning Group, a firm based in Falls Church, Virginia, "You can expect fees to run from a low of $50 or $60 per hour up to a high of $400 or $500 per hour."

Grady, the American Express financial planner, says that the flat-fee-plus-commission structure is the one most often employed by his firm's 8,000 advisors nationwide. Depending on a client's needs, a financial analysis plan can cost anywhere from $250 to $5,000-plus. Fee structures can be flexible enough in that clients with roughly $100,000 in assets, for example, are charged a 1% management commission, Grady adds.

For many people, though, the costs involved in hiring a pro are well worth it--especially if the planner helps you to achieve your goals. That was the case for another one of Grady's clients, Cynthia Stewart, a manager at Chase Manhattan Bank in Wilmington, Delaware.

Stewart, who is 45 and single, had long dreamed of owning a home. So when a local YMCA sponsored a financial workshop, she attended. Grady and a colleague were the speakers. After the seminar, she contacted Grady and became a client. He immediately showed Stewart how to eliminate unnecessary expenditures and placed her on an aggressive savings plan. In less than a year, Stewart socked away enough money for a down payment on her very first home.

"I tell all my friends how pleased I am," Stewart says, beaming. But Grady's sage advice didn't end there. He also admonished his client not to run out and buy expensive furniture, electronics and household goods on credit. "Now every time I go to purchase something, I hear Dwayne's voice in my head warning me against getting something that may take a year to pay off," says Stewart. "He really keeps me on track."


After you've done your homework and have analyzed the backgrounds of potential planners, the next step is to actually meet at least three advisors face to face. This way your chances of finding the planner who's right for you will be greatly increased. At a bare minimum, you should meet with two professionals to compare their different styles and approaches to financial planning.

During this meeting, review the information you have in hand. Go over any questions you have about the planner's experience, services or costs. Additionally, ask the planner how he or she likes to communicate. Does the advisor prefer phone calls or letters? Can the planner be contacted via e-mail? Is the person willing to come to your home or office? The answers to these questions should help you gauge the accessibility of the advisor. Try to get a feel for the planner's way of doing business. Is it compatible with yours? It's also helpful to ask a planner if he or she has clients with financial situations similar to yours.

Although the planner may have experience working with individuals like you, he or she should structure a personalized plan for you.

If the cost of a full-blown financial plan is prohibitive, you may be able to shave expenses by asking whether the planner will sit down and talk with you for an hour or so about a special area of concern--such as taxes or estate planning. Besides cutting costs, there's another advantage to this strategy: you get to test your working relationship with the planner before you allow them to manage your money.

You should also ask how many times the planner will meet with you during the course of a year. Expect to get together at least once annually or on a semiannual basis. This way, your advisor can make sure that your financial goals or family status haven't changed dramatically. The planner should also use subsequent consulting periods to assess your progress.

After the meeting, check the planner's references. If the advisor has supplied you with a list of clients, call them and ask whether they are satisfied customers. For an extra level of protection, investigate whether a planner has been subject to any disciplinary action. The CFP's Board of Standards (800-237-6275) can tell you whether its licensees are in good standing. Finally, there are agencies nationwide--most of them called Corporate Securities Commissions--that provide information on registered financial advisors. For referrals to state securities commissioners, call the SEC at 800-732-0330 or the North American Securities Administrators Association at 888-846-2722.


By this time, you're pretty much armed with all the information you need. OK, now what do you do after you've met and investigated several prospective planners? Who gets the final nod?

"Assuming you've screened appropriately for factors like background and experience, you should select a planner based on a personality match," says the ICFP's Buie. Why? The financial planner-client relationship is one of the most personal and sensitive business relationships you will ever enter into. Some people find it as personal as picking a physician. And if things work out, you'll probably end up keeping the advisor over the long haul.

Therefore, you need to pick the planner who makes you feel most comfortable and with whom you can be completely open and honest about your financial life, Buie explains.

Grady agrees. "It may sound corny, but the chemistry really has to be there," he says, adding that after meeting a potential planner, "You've got to walk away from that meeting feeling like your advisor is seriously going to be working in your best interest."

RELATED ARTICLE: Here's a list of agencies to help you separate the pros from the charlatans

WANT TO MAKE SURE YOUR financial planner is up to snuff? Well, there are a number of organizations that you can consult to help you make that determination. Through the following outfits, you can find certified financial planners and licensed investment advisors and their track records:


(800-732-0330 or

This government agency is designed to protect investors and the public in stock, bond and mutual fund transactions. More than 7,500 investment advisors managing $25 million or more are registered with the SEC. You can contact the organization to request information on an industry professional or firm as well as to lodge a complaint against a registered investment advisor.


(800-945-4237 or

IAFP includes financial planners among its members and develops conferences and programs to explore how such professionals can better serve their clients. It also hosts Website forums to inform the public about the role financial planning plays in managing investor risk.


(888-846-2722 or

The organization's state commissioners help regulate the securities industry with the SEC. Consumers can contact NASAA to obtain phone numbers of state securities commissioners who monitor the records of securities-licensed financial planners.


(800-282-PLAN or

The ICFP is a professional organization with more than 14,000 members who hold CFP licenses or are seeking that designation. Contact the Institute to receive the names of three certified practitioners or free brochures about financial planning.


(888-FEE-ONLY or

NAPFA boasts the largest professional association of fee-based planners in the U.S. By calling NAPFA or visiting its Website, you can learn about the Association's mission, find a fee-only planner in your area or gain access to detailed disclosure forms.

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Title Annotation:how to select an financial advisor
Author:Khalfani, Lynette
Publication:Black Enterprise
Date:May 1, 1999
Previous Article:The Magic Touch!
Next Article:lessons from the top.

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