Professional Advice

It's often helpful to get some objective professional advice on financial matters from time to time. The challenge is to find the right advisors for you -- those who will put your own interests above their own. True, some insurance agents, attorneys, investment advisors, and financial planners have a well-deserved bad reputation. But with a little digging you can find financial professionals who will serve you well. Finding the right advisors is well worth the effort. There is no single ideal way to identify the cream of the crop, but word of mouth recommendation is often the most effective way. Ask acquaintances of similar age and financial circumstances to yours for recommendations. If you already have an adviser that you are happy with, ask him or her to recommend professionals in other areas where you need assistance. Hopefully, there will be no referral fees involved, but it doesn't hurt to ask.

Insurance agent
Insurance is a complicated business, so you probably want to use an agent for all or most of your coverage needs. The better agents will review your coverage with you at least annually, shop around for appropriate policies, and go to bat for you when necessary. If you're having difficulty securing some needed coverage, for example, because of a health problem, a good agent will work hard to find you the necessary insurance at the best possible price. To assure a good relationship, you must keep your agent informed of changes in your circumstances. If necessary, insist on a periodic review of your coverage.

Should you buy insurance on your own? The serious do-it-yourselfer can obtain insurance without using an agent. Many Web sites offer comparison shopping services, and some major insurance companies sell policies directly to individuals as well as through agents. You may be comfortable doing that, or you may not. A good agent can provide you with guidance that is very difficult and time-consuming to acquire on your own. On the other hand, you may be able to save money by going direct. Remember also that the decision to use an agent or to buy insurance on your own is not an "either/or" decision. You may want to buy some of your coverage -- term life insurance, for example -- direct and obtain your automobile and homeowners insurance through an agent. Here are some key times when you need to either check in with your agent or, if you obtain coverage on your own, review your coverage:

  • Any change in family, job, health, or financial circumstances
  • Before retirement, in order to evaluate any needed changes in coverage
  • Coverage should be reviewed annually under all circumstances to determine if any changes are warranted

You may not yet have a family attorney. But you'll need one at least to prepare necessary estate planning documents such as wills. It's best to have an attorney who is roughly your age or younger. You'll probably use the same attorney over the years, and you don't want to be burdened by having to find a new lawyer when your current one retires. Don't try to prepare legal documents yourself. Even when you can get away with doing that, how will you know when you need to make changes? While most attorneys are up to the task of preparing basic estate planning documents, if your financial or family situation is particularly complex, you may need an attorney who specializes in estate planning, particularly since the estate tax environment is likely to change in the near future. But whomever you select, he or she should be responsive to your needs and should conduct work on your behalf in a timely manner. Here are some situations that often require a consultation with an attorney about the adequacy of your estate planning:

  • To prepare a will and other essential estate planning documents. Don't try to prepare these important documents without the assistance of an attorney.
  • Any change in your family situation, including the arrival of children or grandchildren, divorce, and entering into a partnered relationship.
  • Any change in your financial status, both positive and negative, may require a change in your estate planning
  • Periodic checkup. In the absence of any changes in your life, you should check in with your estate planning lawyer every few years to make sure there have been no changes in regulations or the estate tax rules that may require a tweaking of your documents.

Investment Advisor
Investment advisors are in the business of giving advice about securities. Most financial planners are investment advisors, but not all investment advisors are financial planners. Selecting someone to help with your investments is a critically important decision, particularly since almost anyone can call themselves an investment advisor even though they do have to be registered with state or federal regulators. Be sure to inquire about experience, educational background, how they are paid, the kinds of investments they select for their clients, and how they would envision handling your investments. You should expect the following from your investment advisor, at a minimum:

  • Periodic verbal updates on your investments and plans for any changes therein over the near future
  • Written analyses of investment performance and comments at least twice a year.
  • Prompt responses to any questions or concerns you may have

Financial Planner
You are your own best financial planner, but that doesn't necessarily mean you shouldn't retain the services of a financial planner. While financial planning is a service everyone could use, many people don't benefit significantly from the services of a financial planner. You may do quite well on your own. Too many people think the planner can turn their finances around. But financial planners aren't miracle workers. Also, many financial planners are actually insurance agents or investment advisors who may not be capable of or interested in dealing with the multiplicity of matters that affect a person's financial well-being, including paying off loans, taxes, pensions, retirement planning, and estate planning. They may understand a lot about the products they sell, but they may not be well versed in other important financial planning areas.

When it's most important to take a close look at your financial situation. Even if you prefer to manage your own finances, there are times in your financial life where the services of an independent financial planner may be very helpful, if for no other reason than to attest to the fact that you are on track, including:

  • Shortly after starting your career in order to help you get on the road to saving and selecting the best ways to save for retirement and for other needs.
  • Preparing for major financial outlays, including buying a house or meeting college costs.
  • Mid-career, twenty or so years into your career, to gauge your progress toward meeting your retirement goals.
  • A couple of years before retirement to begin to plan on changes in your financial life and needs when you retire.
  • A couple of years after retirement to make sure your investments and retirement budget are on track.

Finding a good financial planner. What constitutes the right of kind of planner for you depends on your needs. If you want to be assured of getting objective advice, use a fee only planner -- but be prepared to pay for the service. A fee only planner usually, but not always, is in the business solely to provide you with independent advice. That's often what you need, particularly if you use a financial planner infrequently. That doesn't mean a planner who earns commissions should be avoided, so long as you understand that there may be a conflict of interest. Look around; there are many excellent financial planners – both fee-based and commission – in your community.

If it's not working out. It's amazing how many people dislike or distrust their advisors, particularly their investment advisors, yet continue to do business with them. If you're unhappy with one of your advisors, it may be because you have not taken an active role in the relationship. First, try to resolve the problem, but if it persists, don't hesitate to make a change.