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Sometimes Recognizing You Need Help Is the Best Move

Millions of Americans have discovered something with the stock market's swings--that adequate financial planning may require a pro.


This process is a bit easier if you understand where the commissions, and thus the conflicts, are biggest. Specifically:

* All insurance products carry commissions. "Term" insurance, the type that pays only a death benefit, pays the smallest commission, while cash-value insurance pays the biggest--as much as the entire premium payment for the first year. (Note that cash-value policies come in myriad varieties, ranging from "whole life" to "variable universal life." What they have in common is that they build up an investment account within the policy. For more information, go online to

* A load mutual fund charges either an upfront or back-end fee, figured as a percentage of your investment. Generally, the bulk of that fee goes to the planner who recommended the fund. Loads usually range from 3% to 8.5% of the amount you've invested.

* Brokerage and asset management services also can provide planners with commissions based on how much you trade or how much money you have the planner manage.

* Limited partnerships, highly popular in the 1980s, are rarely recommended anymore, as loopholes have been closed and tax rates have come down. When they are suggested, look carefully at the partnership documents. Often these investments pay hefty fees--in the range of 25% of your investment--to those who sell them, while offering little assurance of a decent return.

There's nothing wrong with paying a commission. However, you should know how much you're paying and be able to evaluate whether you're getting sufficient value for your money.

For example, if a planner recommends a load mutual fund, ask why that fund is a better choice than a similar no-load fund. On occasion, a load fund will carry significantly lower annual expenses than other funds in its class. If that's the case, despite the commission, the planner's advice is likely to be in the best interest of a buy-and-hold investor. If the planner can't explain why the load fund is superior, seek advice elsewhere.

Likewise, cash-value insurance can be worth the high price if you have a disabled child or a family business and are likely to need insurance forever. (Term insurance gets far more expensive as you get older.) But traditional families who need lots of coverage when their children are young and less as they age are usually better off with a term policy.

4. Do some things yourself.

In an ideal world, you'd hire a fee-only advisor to help you budget, do your investment plan, evaluate your need for life, health and disability insurance, structure your college savings account and help with tax and estate planning.

In the real world, money is finite and top-notch advice is expensive. Consider whether you can afford to pay for advice on just your highest priorities, and address the less important issues with research you do yourself, using newspapers, self-help books and Web sites.

5. Survey your friends.

Have your friends sought financial counsel? Are their situations similar to yours? If so, were they satisfied with the advice they received? Do they have anyone to recommend?

Make a list of planners your friends like and a list of issues to discuss when you interview candidates.

6. Call planner referral lines.

There are a number of financial planner referral lines. These are largely automated and don't let you request people who specialize in the services you need. However, when you follow up, be sure to ask about their areas of greatest expertise. There's no point in setting up an interview with someone who will not be able to address your issues.

For fee-only planners, call the National Assn. of Personal Financial Advisors at (888) FEE-ONLY. If you are looking for fee-and-commission-based planners, call the Financial Planning Assn. at (800) 282-PLAN. You can also get a list of local planners on the FPA's Web site at Click on the "consumer service" icon.

If you need an attorney for issues such as estate planning, call your local bar association.

7. Interview prospective planners.

Winnow your list to a few planners. Set up appointments and prepare. (Many planners do not charge for these initial interviews, but a few do. Make sure you know before you go.) Both the FPA and NAPFA offer free booklets that provide a series of suggested questions.

If the planner says he or she specializes in your area of interest, ask about commonly seen problems and how the planner solves them. This should tell you whether the planner knows as much as you do about your group's specific challenges.

Ask about fees and how the planner likes to work. Will the person talking to you draw up your plan, or will it be designed by someone else on the staff? Whom do you call with questions?

If the planner is paid through fees, are you charged by the hour or a flat fee? If payment is by commission, which products pay the most?

Planners should not be defensive about their fees, Briaud said. If they are--or are simply unwilling to give details--look elsewhere.

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