Financial Planners and Other Mysteries of Life

I am noticing a growing trend in my mailbox — readers in search of financial planners or advisers. Or assistants. The problem is that when taking in the message’s context it’s pretty clear that not everyone means the same thing when they refer to a financial “planner-advisor-assistant-helper.”

One reader wanted to know where to find a “financial planner” who would just take her paycheck, pay all of her bills, invest for her retirement, give her an allowance, balance her checkbook and not charge her very much. (We’d all like one of those, right?)

Then, there are times when the context lets me know that a desperate reader looking for a “financial planner” really needs a reputable credit counseling organization that offers debt management.

And so, in an effort to clarify and perhaps educate, here’s the low-down on financial planners.

GENERAL

Anyone can call himself or herself a financial planner. If you are ready to seek the services of a financial planner, and to avoid an amateur, you want one who has earned the special credentials of Chartered Financial Consultant or Certified Financial Planner.

These professionals make a comprehensive analysis of your entire financial life, identify your goals and then create an investment and insurance strategy to achieve those goals.

Generally, but not always, a professional financial planner will have minimum standards for new clients that have to do with net worth. Financial planners are not typically debt counselors. If you are deeply in debt, a financial planner is likely to tell you to come back once you are out of debt.

Planning means more than investing. Not all planners offer comprehensive services. Some give investment advice or focus on one aspect of planning like insurance or taxes. Estate planning is often offered by a credentialed financial planner or consultant and includes wills, trusts, tax planning, legacy and end-of-life planning.

Fee-only financial planners are paid only for the advice they give. Typically they charge by the hour ($200 to $250), like an attorney. They do not earn commissions by selling financial products to you such as life insurance and mutual funds. You can find fee-only planners at NAPFA.org or call 847-483-5400.

Fee-based planners earn fees plus commissions. Like a fee-only planner, you pay for the advice and financial plan. The planner also earns commissions if you purchase products recommended in the plan.

Commission-based planners make money from the products they sell. Typically this type of planner does not charge for his or her time, but has a big incentive for you to purchase the products they recommend.

OTHER OPTIONS

Theoretically, everyone can use the services of a financial planner at some point in the financial journey. But certainly not until one is free of credit-card debt as well as other unsecured debt, too. A financial planner will want to see a consistent positive cash flow. Until you have achieved that level, there are other services that can help you.

CREDIT COUNSELING

If you are in a credit card mess and unable to keep up with even your minimum monthly payments, credit counseling may be the answer.

A qualified counseling organization will be able to go to your creditors on your behalf to create a payment plan you can afford. You will receive education to make sure when you are out of debt you do not return and there will be a nominal fee.

To avoid the scam artists and to find a certified counselor in your area, go to NFCC.org or call 800-388-2227. This is the only organization that I recommend to my readers. NFCC has certified counselors in every area of the country. Logging on to the website or calling the toll-free number will quickly put you into contact with the office closest to you.

DEBT MANAGEMENT PROGRAM

This will be offered to you in conjunction with credit counseling. If you enter a DPM, you will write one check each month for all of your credit card debt and the payments will be sent to your creditors accordingly.