You may have noticed that there are any number of people who are willing, for a modest fee, to help you manage your money and accumulate assets. Bankers and brokers. Lawyers and accountants. Insurance agents and investment advisers.
So you need yet another? Sure, you say, about as much as you need another indigent brother-in-law.
In fact, say members of a new and still poorly defined profession, you do need another financial counselor, precisely because you have all these other would-be wizards and money mavens hanging around. You need someone to coordinate what they are doing, encourage them to talk to one another, and make sure they are not trying to solve your problems simply by selling you whatever they happen to have on the shelf.
You need a financial planner.
In a simpler time, personal financial planning was, for most small-business people, a by-product of more tangible services. The accountant prepared tax returns and maybe suggested how to shelter a little income. The lawyer got involved in estate planning and maybe sat down with the banker to talk over a trust.
Now, say the planners, the fast-changing financial world has made such seat-of-the-pants planning obsolete. Inflation. Ever more complicated tax laws. The rise of financial conglomerates and the amazing proliferation of investment vehicles. Who knows, in this turbulent world, whether you would be better off with a real-estate tax shelter or a single-premium deferred annuity? Surely not the people who are trying to sell you each one.
The people making this argument are a mixed bunch. Gus Hansch, of Hansch Financial Group in Los Angeles, got his tart selling insurance. Deane Kanaly, in Houston, runs a trust company. Bill Hewitt, in Boston, has established something called Wealth Advisory Group. Not all the planners, however, work out of independent outfits such as these. E. F. Hutton, Investors Diversified Services, and Bank of America all offer financial planning, as do a host of other money-business giants.
Individual practitioners who have completed certain courses and have a certain amount of experience can call themselves Certified Financial Planners or Chartered Financial Consultants (see sidebar, below). But anyone who wants to set up shop as a financial planner can do so, since there are as yet no formal licensing or registration procedures. A rule of thumb: If you are coming at financial planning cold, look for the CFP designation. It is at least an assurance that your would-be planner expects to consider the big picture.
The importance of financial planners, in any event, lies not so much in who they are but in what they have to offer. What follows should help you to decide whether you need one and, if you think you might, to know what questions to ask when you begin looking. Those questions in turn reveal a good deal about what planners can and cannot be expected to accomplish.
To determine whether you need a planner, consider four points. If only one applies to you, you may have more pressing matters than financial planning to attend to. If more than one item fits, though, you are definitely a potential client.
1. You run a closely held business-. "Most small-business owners fail to realize that their personal finances are intertwined with their business's," says Deane Kanaly, whose staff specializes in working with such companies. "Your own money has to be handled differently depending on what's going on in your company.
2. You have outgrown the various financial advisers you have been using, and your financial affairs reflect it. Signs of trouble include an investment portfolio that hasn't been "cleaned" in a while, a set of insurance policies that are out of date or an income situation that leaves you vulnerable to an oversize tax bite. Another sign of trouble: not sleeping well for worrying about money.
3. A major change is in the offing: a divorce, an inheritance, an initial public offering, or simply a dramatic shift in your income level. Talk to a planner first, advises Claire Longden, first vice-president in the New York office of Butcher & Singer Inc., a brokerage firm headquartered in Philadelphia, "not afterwards, when there's a mess."
4. You don't have the time or inclination to do your own financial planning. It is not a mysterious field, and an astute executive who wants to master the intricacies of personal cash management, taxes, estate planning, and investments can do so, particularly with some specialized outside help. But it does take time. A useful exercise, says Merrill Lynch Pierce Fenner & Smith Inc. vice-president Wayne Nelson, is to think how long it now takes you to earn, say, $10,000. A month? Two months? You should be willing, he says, to put that much of your own time into planning investments and tax strategies designed to net you another $10,000.
If you think you are a potential client for a financial planner, you should ask lawyers and accounting firms to suggest names; they themselves may be candidates for the job. Trade associations will suggest people, too.
"Contact most of the names that are given to you," advises Butcher & Singer's Longden. You can find out in a telephone call, she says, whether the planner you are talking to is knowledgeable about your concerns and whether you seem to be on the same wavelength. Then arrange for an initial interview, preferably with your spouse present, and be certain that you both feel comfortable with the planner. "You will get to know this person, Longden cautions, "better than you would a psychiatrist."
Compatibility, of course, is important in any professional relationship. In other respects, the job of finding the right planner differs significantly from the job of finding the right accountant or lawyer. Because there are so few rules about what financial planning is and who can do it, you need to spell out much more carefully than with other professionals what you will be getting and how you will be paying for it. You also need to watch out for some well-defined pitfalls.
A plan is simply a series of recommendations. Some people can make do with a 25-page report (see "A Second Opinion," page 201), most of which is computer generated boilerplate cranked out for anyone in a given demographic category. Many businesspeople will need a more elaborate plan that delves deeply into their business as well as their personal affairs. Any planner should offer you an initial review of your situation -- at a nominal fee, or for free -- in which he or she specifies exactly what your plan will cover.
