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Planning for a financial planner Do your homework before signing on the dotted line Monday, September 04, 2000 By Dan Fitzpatrick, Post-Gazette Staff Writer
Renny Clark, 57, once had his future neatly planned. After more than three decades as a community affairs and corporate services executive with Westinghouse Electric Corp., he would retire at 65 and travel the country with his wife, Linda. A casual investor who did not like tinkering with the stock market, Clark had some money socked away in a 401(k) retirement savings plan, a personal savings account and annuities.
He felt comfortable.
But things changed. When his father died in 1995, Clark began helping his mother manage her money. That same year, Westinghouse bought CBS Corp. It moved its headquarters to New York two years later and began dismantling its industrial units. He realized he might be out of a job before he had the chance to retire.
"It's like, 'Hey, dummy, wake up,' " he said.
Clark, feeling uncertain about his future and overwhelmed by the choices before him, made the decision to hire a financial planner. As he would learn, the right planner can help organize and clarify a family's financial affairs. A planner can also help with the purchase of a new home, a retirement plan or a college fund.
But the search for a good planner can be tricky, too.
The key is knowing what questions to ask and where to look for information.
"Buyer beware and do your homework," said Neil Alexander, vice president of operations with Hefren-Tillotson Inc., a financial services firm based Downtown.
Start with a planner's credentials.
There are more than 200,000 planners in this country. Distinguishing one from the other can be confusing. For more specific needs, some people turn to stockbrokers, insurance agents or estate planners. For more general needs, people often turn to planners certified with groups such as the Certified Financial Planners (303-830-7500), Personal Financial Specialists (212-596-6200) and Chartered Financial Consultants (610-526-2500).
All provide lists of local members.
"In some ways, it is daunting because there are a number of designations out there," said Doug Nogami, spokesman for Certified Financial Planners Board of Standards, a group that has about 36,000 planners as members.
But credentials are important. They guarantee a certain level of experience and a willingness to learn.
Take the CFP board, one of the largest financial planning organizations in the country. It requires its members to pass a two-day, 10-hour examination and complete three years in the financial services industry before they can become certified.
The organization also expects its planners to follow a code of ethics and take continuing education courses.
Just because planners have a designation, though, "doesn't mean they all know what they are talking about," said George Dukovich, owner of Dukovich Financial Services in the Strip District.
Clients can learn more from an interview.
Ask the planners about their experience, education, specialties and how much contact they keep with clients. Ask if they have more than a few clients and ask how long they have practiced locally. Ask for references. Ask for a disclosure statement that details the planner's compensation, conflicts, business affiliations and qualifications.
Ask about fees, too.
Planners typically charge clients in three different ways: fees, commissions or a combination of the two. Some people do not like commissions, considering them an incentive for planners to push risky investments.
But fees can be expensive, too.
They typically range from $150-to-$250 an hour, according to Dukovich.
A flat fee for a complete financial analysis could run from several hundred to several thousand dollars. Some firms base their fee on the performance of a client's portfolio -- an incentive for good performance.
Either way, ask for an estimate up front.
Before agreeing to work with a planner, do some investigative work, too.
Check the person's criminal and disciplinary record with the National Association of Securities Dealers (1-800-289-9999), the Securities and Exchange Commission (1-800-732-0330) or the Pennsylvania Securities Commission (1-800-600-0007). If the planner is registered with the CFP Board of Standards, call 1-888-CFP-MARK (237-6275).
Also, watch for danger signs.
Clark, the former Westinghouse executive, said he stayed away from planners who tried to make a sale right away. "If someone is pushing planning products early on, be wary," he said. "I don't think they really have your best interests at heart."
When is it the right time to go through all this trouble?
Some people seek a financial planner during a life-changing event, whether it is an inheritance, the sale of a business or a lawsuit. Others turn to outside advisors earlier, for help in building a retirement fund, buying a home or starting a college fund.
Dukovich, who owns Dukovich Financial Services, said a person should seek the services of a financial planner "when you have more questions than answers."
That describes Clark, the ex-Westinghouse executive who started his search once he became overwhelmed by his financial situation.
Two people at his church recommended Hefren-Tillotson, the Downtown financial services firm.
In his first interview, Clark and a planner talked about long-term nursing coverage, life insurance and what would happen to the Clarks' estate in the event of a death. They figured out what made sense for the surviving spouse and the two children and how much the Clarks could give to local colleges, churches, camps and other charities.
"For the first time, I had a true consolidation of my assets and financial resources," he said.
When Clark took another job with the University of Pittsburgh, he and Hefren-Tillotson redid the numbers.
"It is still a work in progress," he said.
Looking back, Clark wishes he found a financial planner sooner.
"We started too late," he said. "Now that I know what I know, I would urge everybody early on in their professional life to think seriously about long-range financial planning."
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