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Finding an advisor
Question: I am a 53-year-old teacher at a state university that offers a Roth 403(b), of which I am taking advantage. However, I have questions about my personal finances and have been seeking a professional who specializes in that area. Does such an animal exist? So far, I have only found stock investment advisers, and even they are not interested in talking to me because my salary is not high enough. Aside from friends, relatives and this website, where do you suggest I look for someone who could take a look at my financial situation and shine a light on, for example, whether to invest in stocks, save for a home, continue to rent or increase my retirement savings? Thank you, Wes, San Diego, CA
Answer: You've hit on a real problem in the personal financial advice business.
Like many people, you'd like to work with a well-educated financial planner that can look at your overall financial situation from your portfolio to your living situation. You'd want someone with a credential like a certified financial planner (CFP) and who only charges a flat fee to limit the conflicts of interest. Problem is, that kind of advice is expensive and the planners mostly work with high net worth households. The middle class is largely priced out of this market.
Planners that charge less are often more narrowly focused, perhaps knowledgeable about stocks or life insurance. They aren't equipped to deal with the broader money picture. What's more, they usually get paid by earning commissions selling you a product.
That said, there are a few options to investigate. I would check out the fee-only planners at the Garrett Planning Network. The planners charge a fee by the hour. They break down your financial planning questions into pieces as opposed to ginning up comprehensive financial plan. That limits the overall cost of their fees and advice. For example, you could focus on your rent vs. buy question.
Over the years I've recommended the website of the National Association of Personal Financial Advisors. It's a portal into fee-only advisor universe. Most of the planners concentrate on well-heeled clients, but will work by the hour.
My last suggestion comes from Jane Bryant Quinn. She's simply terrific and I always learn from her. I've loved her books and columns over the years and now I regularly visit her blog. (By the way, she recently updated her own comprehensive personal finance book, Making the Most of Your Money Now. Check it out.) Anyway, she recently suggested that middle class people might want to look at advisors associated with the Alliance of Cambridge Advisors. It's a fee-only network.
I've done other posts on what to look for in a financial planner. You can find them here.
About the author
Christopher Farrell is economics editor of Marketplace Money, a nationally syndicated one-hour weekly personal finance show produced by American Public Media.
Certified Financial Planner? What exactly does the "Certified" mean? Financial Planners that call themselves "Certified" have passed a test(s) administered by a privately held company located in Denver,Colorado. Basically this company has a monopoly on "Certifying" Financial Planners who want to call themselves "Certified". A Financial Planner does not have to be "Certified" by this privately owned company but this company has been in place for so long handing out its "Certifications" that now there is a public perception that anyone who wants to be a Financial Planner must be "Certified" by this private company. This is great for this company because they have created for themselves a constant stream of customers;if a Financial Planner wants to call themselves "Certified" they automatically go take the test(s) administered by this one privately held company. Don't believe that you're automatically going to get good advice just because the Financial Planner you are seeing has the word "Certified" tacked in front. Just remember not to put any money into anything that you don't understand. Do your own research as much as possible and stay informed on your investments.
Roche,
While your statement that not all CFPs are going to provide good advice is true, you seem misinformed on what it takes to become a CFP(R). First, the CFP Board of Standards, which is located in Washington, D.C. (not Colorado), is a non-profit organization (not a "private company") responsible for granting CFP certification and holding it to the public as the highest possible standard in financial planning. Just to qualify to sit for the exam, an individual must take courses in all financial disciplines. The exam is a brutal 10-hour, 2-day test with a pass rate of about 50%. (The tests are administered by Prometric, a global leader in testing and assessment.) Then, those who wish to become CFPs must have at least three years of qualified work experience before they can be certified. They must also abide by the CFP Board Code of Ethics and Practice Standards. Finally, those that receive the CFP(R) designation must fulfill 30 hours of continuing education every two years.
The financial industry is full of alphabet soup designations and certifications that are meaningless. The CFP(R) is not one of those, but rather the one that demonstrates a passion and commitment to financial planning.
I'm trying to decide between just using my Schwab account where I'm invested in a diversified portfolio of mutual funds that I "set and forget" vs a Chase private client account where these is a 0.86% fee of total holdings charged BUT has access to these "institutional" funds that are supposed to perform better than if I just set it and forgot it at Schwab. The chase account also comes with a financial adviser that I trust BUT... I really have no idea how to compare these two approaches. If I could compare a similar risk portfolio in Schwab to the same risk portfolio in Chase over 5 years that would probably do it but I expect it is next to impossible to get that accurate a "risk comparison". How do I compare?
