8 Replies Latest reply on May 23, 2012 2:26 PM by JerryD

    Reliable sources for counseling

    wheezy
      I am a 10 year divorcee and both of my children are self sufficient.  I have a small nest egg for retirement ~120K in a 403B and have an annuity which I will get small funds from.  THis is from my current employer.  I am relocating to Wilmington NC  for a fresh start.  I will be eligible for ~2100/mo when I hit 68 and eligible for Social Security.  My plan is to have my town house paid off as when I move I will take out a 10 mortgage only.  I need to consult with a person who can sit down and give me a focused plan to prepare for my time of beachwalking and relaxation.  WHere do I start?  Any resources in the Wilmington area that I can sit down with?
        • Re: Reliable sources for counseling
          Moyr
          Is there a difference between certified and chartered financial planners?  Do you know of any online programs that could do the same thing?
            • Re: Reliable sources for counseling
              jkom51
              I've never found a reliable free calculator for financial planning. It's a complex and difficult subject because everyone's situation is absolutely and totally unique. Hope the following info helps - a financial plan is worth what you pay for it. The less $$, the more worthless it usually is. It requires real work, research and analysis.

              It's not impossible to DIY (I did it), but I have over 30 yrs in the Financial Svcs industry in a variety of areas. I WOULD NOT recommend the average person try it. I know too many Boomers who assumed they could, and had their plans wrecked by circumstances they had not properly accounted for.
              ----------------

              "Financial Planning" is an actual legal term defined by the SEC, which regulates the financial services industry. Only specific certifications are allowed to do financial planning, which was formerly called 'estate planning'.

               

              Confusing the issue entirely, one can be called a "financial planner" which means absolutely nothing legal – just someone who works in the industry.

               

              There are well over 14,000 different financial industry titles, most of which are absolutely worthless. Stick with the certifications that really mean something in Financial Planning. NONE of these are government regulated; national associations regulate their own membership under SEC rules.

               

              CFP = Certified Financial Planner. Can be independent, or work for a financial services company (like TIAA-CREF or Schwab)

              ChFC = Chartered Financial Consultant

              CPA/PFS = CPAs with a Personal Financial Specialist certification

               

               

              What's the difference? Legally, quite a lot. Only specific certifications are required to have fiduciary responsibility to their clients, meaning they MUST act in the client's best interest, not their own or the firm they work for/with. Think of hiring a lawyer – he is required to be your fiduciary, and can be disbarred or indicted for not fulfilling his duty. That's what you want for a financial advisor.

               

              The non-certified advisors, no matter how fancy the title or impressive the string of unintelligible initials on their business cards, only have to fulfill a 'suitability' standard. "Suitability" is essentially worthless; it means the advisor is free to put his/her interests ahead of yours, whenever and however they wish.

               

              GETTING HELP

              • Locate a financial planner in your area at www.fpanet.org

              • Find advisers who work for fees, rather than commissions, at www.feeonly.org

              • Get a list of CFPs who charge only by the hour at www.garrettplanningnetwork.com

              • Check that an adviser is a certified financial planner at www.cfp-board.org

              • Check their record for complaints at www.sec.gov/investor/brokers.htm (but be warned, records are easy to 'scrub clean'.)

               

              Only CPAs with an additional Personal Financial Specialist designation can do the same financial planning as CFPs and ChFCs. Find one at: American Institute of Certified Public Accountants' Personal Financial Planning Division (800 862-4272), or the LINC Society of C.P.A. Financial Planners (615 782-4240) (fee only).

               

              Planners can be paid in three ways. Fee-only planners commonly charge $75 to $200 an hour, or a flat fee of $2,000 to $5,000. Commission-only ones are paid percentages of the products they sell. Fee-and-commission planners receive income both ways; with these, low fees often are come-ons.

               

              Many consumer groups say fee-only is preferable. But fee-only planners are hard to find. With commission-compensated planners, people should hire only those who will disclose all the money they'll make from an investment recommendation.
               
              It takes time and effort to find a good professional you can work with (think of finding a new auto mechanic, or a contractor to remodel your house - only this is far more important!). Find at least 2 names, 3 or 4 are better, and research their credentials. The first interview is usually free, but it will only tell you if you like the advisor and think you can work with them - and vice versa, if the advisor doesn't like you or think you're a good 'match' with his/her philosophy, they won't want you as a client.
               
              Narrow the field down and get client references (3 names with at least 5 yrs experience with the advisor) and actually talk to these people. Ask what they think the advisor's greatest strength and greatest weakness are. Ask how often they follow the advisor's advice - you'd be surprised how many clients don't!
              • Re: Reliable sources for counseling
                jofa
                jkom 51 gives some excellent advice.I have done mine on my own and have been successful but I have studied things for years and even taught Personal Financial Planning for 10 years at local colleges - there is no hiding your knolwedge - especially lack thereof -in that setting.
                A lot of people think financial planning is how to invest in the stock market and quickly get disappointed when you make them start at the basics. Tracking your money, establishing short, mid and long term goals, creating a budget, executing the budget, assessing insurance needs, buiding an emergency fund,  etc are not the sizzling elements people want but the bascis are absolutely necessary.  You can definitely do this on your own.  These basic financial plans are all over the internet.
                Phase 2 is when you need to assign income to short, meium and long term goals. This is another stumbling point for folks in that they do not have the patience to wait or the discipline to stick to it. One 41 year old student had zeron saved in her 403.  I knew her school matched her contributions 2:1 up to $8k per year. I explained that she was giving up free money but she said she wanted to buy a new car - she didn't get the mid versus long term thing and had no desire to discipline herself.   She bought a $45k car and is paying over $600 per month for 6 years to pay it off.
                 
                Investing in mutual funds is also something that can be self taught but it takes time. I am not an active trader and like money took the hit in the downturn whereas a professional adviser might have given me different direction.  Still my funds have averaged 11% over the past 35 years - better than the market.
                Should you use a Certified Financial advider?  No, if it is to outline your basic plan as noted above  - you can do that with the basic tools found anywhere. Definitely use a CFP to make plans if you do not want to tkae the time or honestly know that you do not want to go through the basics. jkom51 is right on - find the right person.
                A 61 year olde friend of mine uses a local guy ( NH ) who costs him about $2k per year but the guy has domne amazing things for my friend . He;d rather take his time playing tennis than money management so it is worth the $2k to let someone else do it. DO NOT CHOOSE JUST ANYONE!!!!   Go to a pro.  When I have questions, I call my national account guy ( i am in TIAA, Schwab, Fid., TROWEPRICE) and get free information.
                 
                 
                 
                  • Re: Reliable sources for counseling
                    JerryD
                    Jofa puts the finger on the issue. You need to educate yourself or find a VERY good helper. I like the idea of somebody  helping you to make a solid plan (use a spreadsheet you can use for what-ifs).
                     
                    I learned something after paying an adviser many times the fees he mentions that NOBODY CARES MORE ABOUT YOUR MONEY THAN YOU DO. A corollary to that is that I can lose my money just as well as he did but I am free. Even though I checked this guy and his company out and he claimed to use a strategy that I had followed for years (maybe that's read about) he lost lots of our money which I have been trying for years to apply to our taxes.
                      • Re: Reliable sources for counseling
                        jkom51
                        Jerry, I love your posts, but  you and I keep thumping the same drums and it seems like we're not getting through that our points are very separate.
                         
                        The OP is not in need of investing advice as much as she is in need of someone to run critical Monte Carlo analyses on what is the LEAST RISKY; e.g., best chances of success, for these big financial decisions facing her.
                         
                        As a single woman she is at the highest risk class for elderly poverty. She needs someone neutral to say, "If XXX goes wrong, what will you do? What resources can you call upon? What impact will that have on your retirement plans?"
                         
                        A good advisor is never about making as much money as possible. A good advisor is someone who will ask the questions you haven't even thought of, who will raise the issues you may need to face but are scared to.
                         
                        My DH and I say every day how lucky we are...because we are surrounded by Boomer friends and family who did not plan well, and are now running scared, having to work years longer than they thought they would, because they refused to face the reality that life never goes exactly as planned.
                         
                        They pushed away and ignored all the hard questions, and are paying for it now. These are all people who made more than we did. It has nothing to do with a thrifty/frugal lifestyle, either - we have always been free-spending and struggle still to save money (even retirees need a savings account, something few DIY articles remember to say).
                         
                        But we engaged in critical risk/analysis-based financial planning, starting in our mid-forties. The majority of people DO NOT have this kind of work experience and risk prioritization/mitigation skills needed to do what certified advisors do. It is not easy, nor quick, nor can it be done once and then ignored.
                         
                        It is hard work, and I'm sure you will agree that most people are geared towards doing as little work as possible, especially on something as unpleasant as planning for an infirm old age.
                         
                        When you cannot do a task properly, whether it is changing the timing belt on your car or repairing a roof or doing true financial planning, you will always be better off finding the best possible professional to help you.
                         
                        You are quite correct that "no one cares as much as you do about your own money" - which is why it is all the more important that people learn there is more to reaching financial independence than an investing ROI. 
                          • Re: Reliable sources for counseling
                            JerryD
                            Jkom, you describe a very attractive scenario of working with a "trusted" and valued financial adviser, one we all would love to achieve. However, the following is the problem: "When you cannot do a task properly, whether it is changing the timing belt on your car or repairing a roof or doing true financial planning, you will always be better off finding the best possible professional to help you."
                             
                            I described my very expensive attempts at doing this. My conclusion was to self-educate with the help of others if they can be found so that I can better evaluate the advise I receive. The trouble with any personal service, whether it be a barber or a mechanic or a doctor or an investment adviser or etc., is that it is very difficult to evaluate them until you have paid them often for quite a while. And then it may be too late with bad consequences. It is indeed very "hard work" to find competent skilled help that you can trust. It's not like buying a commodity item at the cheapest place you can or are willing to find. Even the advise you ask for from friends and relatives can be questionable. After all who is going to say that their doctor or dentist or financial adviser isn't really that good? It would be better to ask another proven adviser that relies on your continued trust for future revenue like a tax adviser or estate or family lawyer for a competent financial professional or plan.
                              • Re: Reliable sources for counseling
                                jkom51
                                Just as one would do research (or should) before selecting an auto mechanic or an estate attorney, there is a rigorous process one should engage in to find a good fiduciary advisor.
                                 
                                Yes, talk to professionals such as CPAs or personal attorneys, BUT take their advice with the proverbial 'grain of salt' until you personally have vetted them!
                                 
                                Now, if you did everything below, Jerry, I salute you! Every time I talk about this with people, their eyes glaze over and they nod automatically. I do not know personally one person in a thousand, except for me and maybe my sister who is bordering on OCD, who would actually commit to doing this properly.
                                 
                                Everybody wants a 'shortcut'....but when it comes to your money, taking a shortcut is the riskiest thing you can do, as many can attest. So, once again, here's the right way to find a good fiduciary advisor, whether you want one full-time or just to ask a few questions of:
                                 
                                1) You are going to research for names and interview two, preferably three advisors, after narrowing the field down. How do you do that? Well, there are excellent resources in the forms of "questions to ask" as well as "checklists" on all the important FinSvcs websites, such as:
                                 

                                NAPFA: the National Association of Personal Financial Advisors, is the nation’s leading organization dedicated to the advancement of Fee-Only comprehensive financial planning. Website is http://www.napfa.org/. This is one source for planner referrals.

                                 

                                Garrett Planning Network is an international network of fee-only financial advisors and planners. Website is http://www.garrettplanningnetwork.com/. This is your second source for referrals. 

                                 

                                There is also an excellent list of questions one should ask any advisor in an interview, on the CFP.net website. This website also has a search function for finding a CFP, but they are more geared towards asset-based mgmt CFPs (those who charge a percentage of portfolio assets, usually with a $250K minimum on investments) as opposed to fee-only CFPs.
                                 
                                2) READ all of the above info. Note down anything you don't quite understand. Understand what the process is. Almost every advisor, and every ethical one I know, gives a free first meeting. This meeting is to judge personalities and risk profiles, on both sides. You are looking for a "good fit" on both. The advisor should explain how s/he accepts clients, what their mission statement means, and answer any questions you have, not only about investing in general, but also defining goals, the many factors that go into creating a financial plan (which is almost always a separate cost item), and setting expectations for both advisor and client.
                                 
                                Preferably, beforehand you will have been given a risk profile to fill out and return for analysis, before the first appointment. But many advisors will only request a risk profile when you have committed to being a client. There is no 'right or wrong' way; it's the advisor's personal preference.
                                 
                                Make sure you see a sample client report, which you should receive at least quarterly. Every advisor's report is different. Make sure you understand everything in that report - or at least, why that information is there!
                                 
                                3) From your list of 2-3 advisors, obtain references. There should be at least 3 clients of at least 5 yrs standing, with financial profiles similar (not identical, but close) to yours. Call these people and talk to them! Ask what are the advisor's greatest strength/worst weakness? You don't need a long conversation, just 5-10 minutes will do.
                                 
                                4) Understand that when you find an advisor you think you can work with, that YOUR work is just beginning. You need to make another appointment to talk about how to set your short/medium/long-term goals, what those goals are, and find out what s/he thinks are the biggest risks to your achieving those goals.
                                 
                                This appointment (addt'l cost if a fee-only; free for a portfolio-based acct) would be in lieu of obtaining a true financial plan. A financial plan is a roadmap of how to get from Point A to Points B, C, D, etc. It is a living document and if well planned, will be flexible enough to adapt to the changes that inevitably occur in everyone's lives.
                                 ----------------
                                 
                                Now, I did the financial planning myself, not by focusing on ROI, but by acknowledging the specific morbidity/mortality risk my DH and I faced, along with the pros/cons of our chosen career paths. We made a plan and mitigated risk where we thought it appropriate. It cost us $$ to do so, but it gave us tremendous peace of mind over the years, and continues to do so even in retirement.
                                 
                                This is where the 99% keep going wrong. They fear facing the truth about how much risk they are allowing in their lives. Most people prefer to be a 'Pollyanna' by crossing their fingers and hoping nothing bad will happen to upset their nebulous plans.
                                 
                                You CAN put a $$ sign on risk. Insurers do it every day. The medical profession does it every day. The military does it every day. Everybody faces risks, but you can't plan for it if you don't want to think about it.
                                 
                                A good fiduciary advisor will be happy to discuss personal risk with you. They will need to know a lot about you, because everyone's holistic risk profile is individual. They can help you if you realize you need help...but like the saying goes, if you don't know what you don't know, how can you ask the right questions?
                                 
                                That fiduciary advisor is there to help ask the right questions. If you invest your time, they will invest theirs. Anyone who is really good and committed to their careers loves to talk about it and help educate others. That enthusiasm and drive is what you're looking for, to develop the right working partnership.
                                 
                                Expense? Nothing but time and thought on your part, to make yourself an informed consumer/client. Again, you are not looking for outsized results - you are looking for good results over time, with less risk. Less risk increases your chances for success in achieving your goals. You win, the advisor wins. You lose, a good advisor loses too.
                                 
                                Why? Think of insurance, or retail. The greatest cost is getting the first customer. Repeat business is always faster, cheaper, more profitable. If you can't keep them coming back to you, not only have you lost a customer, they're probably bad-mouthing you to everyone they know. The fiduciary advisors I know have quite a few multi-generational clients. They're in it for the long haul, because they enjoy what they do and they genuinely like helping people.