When you need a financial planner

It's okay to ask for help. Just make sure you get the kind you need.

By Walter Updegrave, Money Magazine senior editor

NEW YORK (Money) -- Question: How do I find and evaluate a good financial planner? I have always done my own savings and goal setting, but I am not a professional. I've worked hard for my money and have always been hesitant to entrust it to someone else. - Robert, Thomaston, Connecticut

Answer: I hear you. I know a lot of people who've been do-it-yourself planners and investors for much of their lives, but for any number of reasons reach a point where they think they might be better off seeking advice from a pro.

In some cases the urge to get help arises because people find themselves dealing with scary large amounts of money. Deciding which mutual fund to put a few thousand bucks into is one thing; rolling a six-figure 401(k) into an IRA is another.

Other times people are just moving into territory they're not as familiar with. Maybe they built a nest egg on their own, but now they need help figuring out how to make it last.

I think it's smart to consider getting help. At the same time, though, it's natural to feel a bit uneasy about working with an adviser. After all, we often hear stories of people who are sold lousy investments or who are outright fleeced.

So what can you do to get the help you want from someone you can trust?

Stick with a qualified pro

Virtually anyone can claim to be a "financial planner." Calling oneself a Certified Financial Planner, or CFP, on the other hand, requires that someone has met the educational, experience, examination and ethical requirements of the Certified Financial Planner Board of Standards, the organization that confers the CFP credential.

Does that absolutely guarantee competence and honesty? Of course not. But at the very least you know you're dealing with someone who has taken courses on everything from investments to retirement planning to estate planning, has had to pass a series of exams on such subjects, has at least three years work experience in financial planning and has agreed to meet certain standards of ethical conduct and professional responsibility.

You can start your search for such individuals at an organization like the Financial Planning Association, the National Association of Personal Financial Advisors (NAPFA) and the Garrett Planning Network. I'd say you should probably talk to at least three planners before signing on with one.

Look for the right fit

The first step is making sure the planner's expertise meets your needs. For example, if you're a retiree whose primary concern is making sure you won't outlive your money, then you want a planner who's already helped many clients successfully grapple with this issue.

But there's another issue of compatibility. Is the adviser someone you can confide in, someone you'll feel comfortable going to with questions, problems and concerns? Ideally you want an adviser who'll listen to your concerns and even draw you out enough about your aspirations to make sure your financial goals are in synch with the way you want to live your life.

You'll also want to consider how the adviser is compensated. Some planners receive commissions for the investments they sell you. Others, such as NAPFA members, charge fees only, usually an annual retainer, a percentage of assets or both.

A smaller group, such as the planners in the Garrett Planning Network, also charge only fees, but will work on a flat fee or an hourly fee basis. And some planners work for fees and commissions, with the commissions typically deducted from the fees.

I'm partial to fee-only arrangements myself because I think commissions raise the possibility that an adviser may be swayed to certain investments because they're more lucrative than others. That said, if you've got a relatively modest investment portfolio, the fees that many planners must charge to make a decent living might be more than it makes sense for you to pay.

Whatever fee arrangement you ultimately go with, make sure you get in writing how much you're paying and that you know exactly what services you're getting for the money you're shelling out.

Oh, and before you pay a penny in fees of any sort, you want to be sure your planner hasn't had any run-ins with regulators such as the Securities and Exchange Commission, the National Association of North American Securities Administrators and the National Association of Securities Dealers.

Keep tabs on your adviser

Just because you hire a financial planner doesn't mean you should abdicate all responsibility for your money. Indeed, to get the most out of the relationship (and to reduce the chances of being ripped off), you should meet periodically with your adviser to see how your overall financial situation is progressing, how your investments are doing and to discuss any adjustments you should be making if you've experienced a significant change in your life (had a child, lost a job, gotten a big promotion or bonus, etc.).

While much of this "keeping in touch" process can consist simply of talking to each other, you should also be receiving quarterly reports outlining the value of your investments and detailing the fees you've paid.

One final note: In answering your question, I've taken it as a given that you actually need a financial planner. Sometimes, however, people say they want a financial planner when perhaps other options might work.

As I noted in a recent column, if you're really looking only for some advice on how to roll over a 401(k) to an IRA or make sense of an investment portfolio that's gotten unwieldy over the years, you may be able to get help at less expense from the advisory services offered by any number of mutual fund or other investment firms.

Whichever route you go, though, this much will be true: the more research you do and questions you ask before signing on with someone, the fewer problems you're likely to experience down the road. Top of page