How do I choose a good financial planner? (funds, pay, million)

[JustJulia]

I hope I've posted this in the right forum.

My husband and I are in our mid-30s and would like to consult a financial planner to find out if our long-term goals are realistic and whether we are reasonably moving toward them. My grandparents have had the same financial planner for years; she has helped them set up their estate, investments, etc. We're not at a point where we have an estate!--and it's not like my grandparents are fabulously wealthy, just prudent--but we think it's time to talk to someone knowledgeable.

We don't live near my grandparents anymore, so we can't talk to their planner, but I don't want to just crack a phone book. Choosing an inexperienced or foolish "professional" can have dire consequences on our long-term plans, right? So how do I find someone? What do I look for? What kinds of certifications, degrees, professional affiliations, etc? How many years of experience? What kind of questions do I ask? What kind of questions might this person ask us?

Thank you very much for your advice.

[JustJulia]

Nobody has any advice? Maybe I should have titled this thread OMG THE SKY IS FALLING HELLLLLP!!!1

[chet everett]

I have been fortunate to have had several decades of experience with investing and have not, unlike a majority of my friends, been 'burned' by bad financial advise. I attribute this to my skepticism. I have paid a few advisors that were recommended to me by colleagues, but honestly, except for a better awareness of tax laws (on the part of some of them...) there is nothing "MAGIC" about the paid advise that I have not gotten from the "free" advice I have gotten from major self directed investment companies like Fidelity, Vanguard, Schwab, Ameritrade , et cetera.

Further, my reading of Barron's and similar publications has turned up better "tips" than any adviser has given. If you have the time to read a few newsletters you will get a good education into how the 'experts' spend as many words using CYA tactics as they do making recommendations.

The designation of "Certified Financial Planner" is not worthless, as that does ensure the person in capable of passing tests, but there are plenty of people that pass the CFP tests (and Series 7, and CFA, and whole lot more) that really screw the pooch when it comes to advice.

I recommend that you read all the books you can find in your library about investing / financial planning. The generalists are very helpful so that you "know the lingo". The "self-promoters" (some of which have radio and podcasts too) are often not bad at all, but when they start saying the same things over and over you will be glad you checked the books out of the library instead of buying them.

Bottom line: personal responsibility / knowledge is far preferable to leaving it up to "some guy with a nice office that I paid for"...

If you do not have an account with Vanguard or Fidelity or Schwab or Ameritrade you HAVE to set one up and use all the little applets and tools they have to help you determine if you are saving enough. Then you HAVE to 'benchmark' your choice of funds against the indices and the broad categories of the ranking services like Morningstar. If you do that you will really not need much more. You will have to make decisions about how much insurance to have, and how much risk you can tolerate ON YOUR OWN, and revisit these decisions on some kind of REGULAR BASIS or your will waste a lot of money!

[little elmer]

Look for a fee based planner, rather than commission - companies pay those advisors to sell their products, which are not in your best interest.

[loves2read]

one point right off the bat--most of the time if you are not what is called a high-net-worth individual you are not likely to get anyone with much experience to talk to you if you go with a company like Fidelity or Vanguard--at least from what I have heard--not that the advice might be bad or wrong--but just that people with less experience service the walk-in type of customer

ask your grandparents to talk to their advisor--maybe s/he is part of national firm like Edward James or Schwab or TIAA-Cref or maybe tied into a bank that might have branches in your area--maybe s/he could recommend someone specifically....if not or you are not comfortable with that then maybe they could ask for some general guidelines about choosing an advisor---
what are the questions s/he would suggest you ask and the credentials you should look for...

a fee-based planner is definitely something to consider, but frankly 99% of advisors will start with a free consult to discuss your basic situation, then do a planning senario for a fee, and then most of them want to manage your investments for a %...
it is just what they do to be profitable...

there are probably very few financial service consultants who do ONLY fee-based, once a year or once a lifetime type of planning sessions...frankly they would not be able to stay in business...
and unless you have some background to judge the advice it still might not be right for your situation...
I would say try to make a visit to your grandparents and schedule an appointment with the advisor...
you could present your info, discuss your situation and then probably get the suggestions via a speaker phone conversation or maybe using computer cam after the person has chance to review your situation and design a plan...it would really be better to present the info/goals first and have the face to face to review the outline of what the advisor suggests...some advisors with web sites have link to put all that info in when you ask for a face to face intial discussion...

Right now there seem to be two very divergent theories of investing--there is one that is dug in to the idea that you buy stable, productive, low-cost mutual funds or ETFs in a diversified group of asset classes and do not do any market-timing, short selling, day-trading activity...you just buy and hold and rebalance the portfolio maybe 2-3-4 times a year depending on what has happened in the market...

Scott Burns who was the financial investment reporter at the Dallas Morning News for decades has started an investment/advisory company...it is geared to that type of investment

you can Google Scott Burns and his site will come up...it has most of his articles going back years, different standard portfolios with a variety of risk levels that his investment company has put together that you can check their returns over the past 1.3.5.10 yrs...
part of that info is compiled not from what the fund actually did but from what they say it would have done if it were open then--because most of them are in DBA funds which is a fairly recent company...

before that he really advocated Fidelity and Vanguard funds and some other specific ones that were basically no-load, low fee and reliable...
people post questions/answers, Burns answers questions about lots of issues like insurance, retirement, estate planning, Roth vs non-Roth, and anything they want his opinion on--including finding a financial advisor--
but most of the advice is geared to using the long-term, low expense, quality funds...
there are other advisors who say they have that same type of approach...

but there is divergent opinion that is getting lots of play from some advisors that says the day of buy and hold is over...that the market has not been that profitable just going by the DJIA for the past few years--that the economy has created a different type of investment environment to make money,
that the market is too volatile to be that complaisant and especially after this market drop the GNP which drives earnings and growth in the market is going to be dead for years--so there will be no profitability to be had--that a 2% increase is not going to be enough to create value for anyone's retirement portfolio...it seems that a lot of that type of marketing is based on fear--fear that you will miss out, fear that you won't have enough when you retire, although the people who push this investment attitude come across as very confident and knowledgeable--lots of charts/graphs and techno jargon about falling averages and 52 wk high and market volumn
it is really pretty intimidating...
this viewpoint advocates use of market timing, more risk taking but managed or qualified risk taking because of the technical insight, and taking advantage of events that would affect the market--
like right now the swine flu outbreak/fear has caused run up in stocks of companies that make the vaccine--and some other medical related stocks---it has also caused downturn in airline/hotel/vacation type stocks...
so people who were doing this type of trading mentality were buying one and selling the other...
or taking long/short positions ...
that style is much more complicated, takes more time/energy/attention, requires a different mind-set, and while I won't say that you never lose money in the buy/hold format (cause plenty of people certainly did in 08 and other years depending on what stocks/funds you picked)...there is certainly more volatility in the way money goes in/out of the account...

of course you would not necessarily do this yourself--there are financial guys who favor this type of investment and do the trading for you...the first investment guy we used did this with part of our account--don't think he was really any more successful than buying the right index fund/mutual fund...but the trick is all in buying the right fund/stock...and having a plan that is designed to work right for your situation/expectations

[NYSinger]

Look in the mirror. Seriously, most financial planners are out for themselves.

[HSVbulldawg]

I will probably repeat some of the points on here, but this is my advice.

1. Your first step should be to educate yourself about personal finance. It will be much easier to judge whether or not someone is giving you good advice if you have some knowledge. Also, and this is I think the most important point, you are ultimately the one who has to live with the results (and your savings and investments will affect you greatly, especially in your later years.)
- Read Millionaire Next Door and The Automatic Millionaire
- If you want to be an active investor, read up on value investing. Warren Buffett is a value investor. Benjamin Graham's "The Intelligent Investor" is a good resource.
- If you want to put minimal effort into investing (or really can't), read up on stock index funds. Don't try to game the market or get an above average return if you haven't put the time in to research investments.
- Read the Wall Street Journal and other business publications online (try it for five minutes a day.) Don't run out and try to implement the first few investment strategies you read about. Don't buy the "expert's" stock tips. Just take some time and try to read up regularly on what's going on.
- Read up on various financial designations. What do they mean? Why would that designation be helpful? The Alphabet Soup Of Financial Certifications Also read up on CPAs.
- Read a few books on retirement investing and research various insurance options. Insurance can play an important role in keeping you from financial ruin.

2. You should probably divide out the different areas you want advice in and figure out which areas you will need advice in and which areas you can research on your own. Here are my quick tips/ideas:
- Consult a CPA on tax issues. What are the financial transactions you would like to make, what are the tax consequences, and can you structure those transactions in a way that will reduce the taxes you will pay (legally)?
- Once you have an idea of the investment strategy you want to use (based upon prior research) seek out someone with a financial certification to consult with. Don't put all your eggs in one basket (don't let this person be your base for all financial investments.) Also, try to talk strategies instead of specific funds/stocks the person may try to sell to you or recommend. Then, take the information home (as well as any fund recommendations) and do more research.
- Consult a lawyer on various legal arrangements that will protect you and your family if you or your significant other dies. Also, consult a lawyer if you are trying to invest in a complex deal or transaction. Get established with a lawyer so that when various random situations come up that could affect you financially, you are prepared.
- It sounds like you already have people you can call on to help you evaluate any advice you receive. Run financial transactions that will affect your taxes by your accountant. Run legal matters (contracts etc.) by your lawyer.

[Irish Eyes]

And when you find one go to FINRA - FINRA BrokerCheck and look up the person you have chosen. You will be able to see if he has an arrest record and/or any customer complaints. If you're going with a smaller or lesser known firm you can check them out as well on that site. Actually the whole FINRA website is a good resource for investors.

I would definitely recommend a fee based planner as well. You can get his advice re allocation, retirement etc and then invest yourself through no load mutual funds. You have been given good advice to educate yourself before meeting with anyone, though. You want to have at least a basic understanding before getting anyone's advice. I think "smart couples finish rich" is a great, basic, easy to understand book.