| Financial planners are more than just stock | | | | and lawyers, have a duty to those whom they |
| brokers - they are trained professionals who | | | | serve, not to their employers. When you are |
| have a fiduciary duty to put their client's | | | | the client of a financial planner, you are |
| interests ahead of their own. | | | | his or her real boss. |
| | | | |
| Unfortunately, a minority of financial | | | | Evaluating Client Needs - The Foundation of |
| planners have given the whole profession a | | | | Financial Planning |
| bad name, mostly by recommending investment | | | | |
| products based more on the commission that | | | | Perhaps the greatest benefit of hiring a |
| the planner receives than their | | | | professional planner is that he or she has |
| appropriateness for individual clients. | | | | experience evaluating the needs of various |
| | | | types of investors. It's sometimes hard for |
| The ease with which one can trade online and | | | | us to sit back and evaluate ourselves - and, |
| the abundance of free investment information | | | | of course, we may not know all of the |
| available on the internet have caused some | | | | investment products and tax strategies that a |
| people to feel that they don't need financial | | | | trained financial professional works with on |
| planners, but while hiring a financial | | | | a daily basis. |
| planner may not be the right move for every | | | | |
| investor, a good financial planner can be | | | | Financial planners can take a look at their |
| worth far more than you ever pay him or her. | | | | clients' financial well-being, goals, and |
| | | | risk tolerance, in order to develop a truly |
| The key is finding the right financial | | | | comprehensive financial plan, that goes well |
| planner. | | | | beyond "buy, sell, or hold." |
| | | | |
| What is a Financial Planner? | | | | For starters, your financial planner may |
| | | | recommend a given asset allocation. Financial |
| Typically, a financial planner (also | | | | advisors tend to recommend that younger |
| sometimes known as a "financial advisor") is | | | | people have a greater percentage of their |
| someone who is licensed to sell stocks and | | | | portfolios in equities (stocks), whereas |
| other securities (bonds, mutual funds, etc.), | | | | older folks concentrate more on fixed-income |
| as well as insurance products. Some financial | | | | securities (bonds). |
| planners may even be able to give tax or | | | | |
| legal advice. | | | | The logic behind this is that young people |
| | | | can afford to take more risks - over the long |
| One major distinction among financial | | | | term, the stock market generally outperforms |
| planners is how they're paid. There are | | | | the bond market. But for older people, what |
| fee-based financial planners and | | | | if the stock market crashes the day before |
| commission-based financial planners. For | | | | they're set to retire? |
| high-net worth investors, fee-based planners | | | | |
| are probably the best fit. | | | | They don't have the time for the market to |
| | | | "correct itself" that younger people do, so |
| This is because you'll never have to worry | | | | this is why financial planners generally |
| about your planner steering you into an | | | | recommend that people begin slowly moving out |
| investment solely to line his pockets with a | | | | of stocks and into bonds as they age. |
| fat commission check - he is paid to give you | | | | |
| advice, not based on what you actually buy or | | | | But this is just a simplified case. Perhaps |
| sell. | | | | your needs are a little out of the ordinary. |
| | | | Perhaps you haven't saved enough for |
| If your financial planner's advice doesn't | | | | retirement. A good planner will recognize |
| pan out over the long run, you're unlikely to | | | | this and recommend that you're aggressive |
| stay with him. | | | | with your investments, even in older age. |
| | | | |
| This doesn't mean that commission-based | | | | Maybe you're young, but you have an |
| planners are all bad. Few financial planners | | | | incredibly weak stomach. You like to play it |
| are able to build a fee-based clientele | | | | by the book, and everything you read says you |
| directly out of college - they have to earn | | | | should be heavily in stocks, but a good |
| their stripes, as it is said. | | | | financial planner will steer you toward big |
| | | | cap blue chips with a healthy dose of |
| The best commission-based planners usually | | | | fixed-income, and your stomach will thank him |
| graduate to fee-based advisory, but in doing | | | | for it. |
| so, they may be pressured by management to | | | | |
| leave their lower net-worth clients behind. | | | | The key is that experienced financial |
| Truly professional financial planners will | | | | planners have seen other clients in similar |
| always do whatever they can to accommodate | | | | situations, and yet they are able to zero in |
| the needs of their existing clients, even if | | | | on your unique needs. This type of financial |
| their assets are modest. | | | | professional is worth every penny that you |
| | | | pay him, because he measures his success by |
| After all, financial planners, like doctors | | | | your success. |