Who Should You Go To For Financial Planning Advice?

Everyone's in the financial planning business these days. Some mutual fund companies, who used to sell nothing but mutual funds, now offer financial planning advice. So do brokerage firms, discount brokers, and accounting firms. Oh, yes, there are still lots of independent personal financial planners out there as well. So whom do you go to for financial planning advice?

What are your needs? The first question to ask yourself is, what financial planning advice do you want? Do you have a specific need, such as investing for college, buying a small business with your lump-sum pension payout, or creating an estate plan? Or do you want someone to help you put your entire financial house in order?

With your answer in mind, does the financial advisor you're considering offer those services? Some organizations offering financial planning-related services will consult with you on a specific goal you may have, calculate what you will need to invest annually to reach that goal, and recommend and manage investments that might meet that objective. That may be fine for one part of your financial life, but it often ignores other financial issues.

A word of caution here. While you may consider your needs very narrow, our financial lives are generally very complicated and intertwined. An action taken in one area may have profound effects on other areas you may not even realize. For example, an investment decision made in a vacuum may have unforeseen tax or estate planning consequences. The key to sound financial planning is looking at the "big picture."

What products are offered? Some financial institutions recommend only products and services from their own menu, since that is what generates their fees and commissions. That may leave out other good-quality investments, or even entire investment areas such as annuities, life insurance, or real estate. Look for an objective financial planner who can recommend from the universe of products.

Is something more than investments and investment advice offered? Amid all the focus on the economy and the long-running bull market, it's easy to overlook the fact that investments are only one part, though certainly an important part, of one's financial life. Less attractive but no less important issues that also may need to be addressed include budgeting, the proper titling of assets for estate planning, finding good health care and disability insurance and choosing a pension distribution option.

For example, it doesn't make much sense to become a successful investor yet neglect your estate taxes. Then you may have the dubious achievement of handing over a large chunk of your investment savings to Uncle Sam when you die. Or you may have to sell off some of your investment during your lifetime to cover emergency expenses because you didn't have a cash-reserve fund or weren't properly insured.

Do I want personalized attention? We all like to think we can do things for ourselves, especially manage our own finances. But one of the great values of a personal financial advisor is that someone is there to educate us about financial planning, motivate us to take carefully planned action, reassure us when the market is down (or restrain us when the market is up), and monitor our financial health.

Is the advisor qualified? Find out the qualifications of the advisor, consultant, or representative you are working with. Are they qualified to advise on a wide range of financial issues you face, even if you are focusing on one area? Have they earned a recognized financial planning credential, such as the Certified Financial Planner(r) designation? What is their education and work experience? Do they have to meet ethical and competency guidelines? Or are they basically salespeople calling themselves financial planners?

This article was produced by the Institute of Certified Financial Planners, a national association representing the top financial planners in the country, and is provided by Robert W. Tull.