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Need help planning for retirement? Saving up for your kids' college costs? Estate planning? Figuring out what to do with an inheritance? If you don't already have a solid financial planner, it may be time to find one. Financial planners provide advice about money and stuff that's worth money. They can zero in on specific goals and provide broad advice on how to better accumulate wealth.

It's important to understand that there are different types of financial planners. Fee-only planners provide only advice, and usually charge by the hour for it. Other types of planners provide advice, but also hold and manage your assets, charging a fee equal to a percentage of the total value of the account.

financial advisorYour financial planner shouldn't act as a stockbroker or investment adviser: He or she shouldn't buy and sell equities or mutual funds or tell you which ones to buy or sell. Because you want an adviser whose judgement isn't clouded by commissions and other possible conflicts of interest, in general, the best financial-planning choice usually is a fee-only planner.

Can a financial planner help you? Maybe. Here's some basic info to help you choose and work with one.

What Can They Do?

Typical tasks for financial planners include:

  • Determining net worth. Adding up the value of your assets and subtracting the value of your liabilities set the table for any planning task.
  • Maximizing investments. Good financial planners can analyze your portfolio, determine how well it's doing, evaluate its risks, and, if necessary, help you make better choices.
  • Devising better ways to save. Good financial planners can evaluate your current and future income streams from wages, retirement and pensions, savings, life insurance and annuities, Social Security payments, dividends, etc., and provide you with an efficient, flexible plan that maximizes wealth, minimizes taxes, and delivers funds when you need them.
  • Providing advice on what to do with inheritances.
  • Assessing insurance options. Should you buy life insurance? Long-term care insurance? Disability insurance? A Medicare Supplement policy? An umbrella policy? Planners can describe and recommend options for your particular circumstances.
  • Evaluating retirement possibilities. Planners can plug your financial facts into calculators and determine whether you'll have enough to retire on comfortably—and help define what "comfortably" means to you. If you still have a lot of work to do, he or she can run the numbers on sensible options: working longer, taking Social Security earlier (or later), working part-time in retirement, moving to a lower-cost area, changing your lifestyle to reduce expenses, and other approaches.
  • Rationalizing retirement income. Planners can tell you the best, most tax-efficient way to take money from defined pension plans, 401(k) accounts, IRAs, Social Security, and other sources of retirement income to supply adequate income, both now and in the future, and to minimize taxes.
  • Saving for college. Good planners know the best ways to save or obtain funding for it, including 529 plans and loan programs.
  • Budgeting and credit repair. If you have a hard time making and sticking to a budget, a planner can help. But keep in mind it's usually not worth the fees to have a planner count and track money coming in and going out. If you have a lot of debt, a planner can help you devise a way to pay it off. But they usually don't help clients negotiate with creditors, and if you're considering bankruptcy, you should hire an experienced attorney.

As mentioned above, planners shouldn't directly invest money for you, and most planners don't sell insurance or offer tax-preparation advice. While planners can help you devise overall estate planning strategies, to deal with a high-value or complicated estate, hire an estate planning attorney.

How Do You Find a Good One?

Start by collecting referrals from friends, family, and colleagues. Look for financial planners with successful experience advising clients with concerns and circumstances similar to yours. If you have kids, ask people who have children. If you just inherited an estate, check with others in the same financial boat. Many of the customer reviews in our "Financial Advisors" section are for financial planners; these ratings also can help you in your search.

Pay attention to certifications. Anyone can add the title "financial planner" after his or her name, but several certification programs are quite meaningful:

  • Certified Financial Planner. CFPs have passed a tough 10-hour exam, have a minimum of three years' experience in financial planning, have finished an approved college-level course of study, or have equivalent professional qualifications or academic degrees.
  • Chartered Financial Consultant. ChFCs have completed a minimum of eight college-level courses on financial planning and must complete 30 hours of continuing education every two years. Many ChFCs focus on insurance issues.
  • Certified Public Accountant/Personal Financial Specialist. CPA/PFSs are CPAs with specialized training in financial planning. They're often good sources of advice about the tax consequences of investment and retirement choices.
  • National Association of Personal Financial Advisors-Registered Financial Advisor. NAPFA-RFAs are required to pass a comprehensive peer review of their planning capabilities prior to joining. All NAPFA members are fee-only planners (see below).

In addition to customer reviews found here, other websites can help you find planners. The Financial Planning Association lets you search for planners using filters such as retirement, savings, college, and more. The CFP Board search tool lets you filter by investable assets, planners' specialties, languages spoken, and method of compensation, and includes in search results info on certification and disciplinary history and bankruptcy disclosures. The National Association of Personal Financial Advisors lists members who are fee-only planners, and NAPFA's membership standards are similar to those needed to earn a CFP credential. For clients with a narrowly defined problem or set of questions, the Garrett Planning Network accesses CFPs and planners actively working toward certification who offer services for small projects for hourly fees only.

Ask candidates:

  • What are your credentials?
  • How many years of experience do you have?
  • What types of clients do you usually work for?
  • What services do you offer?
  • Who will do the work? You yourself or another member of your firm?
  • Can you provide references of clients whose goals and financial profiles match mine?
  • What can I expect? Although you should be skeptical of planners who guarantee rates of return, planners should help you set goals and tell you whether they can reasonably meet them.
  • Who else benefits from your advice? Are there any potential conflicts of interest? If so, what are they?
  • How are you compensated? Avoid planners who try to sell you specific investments in exchange for commissions; you want a planner who works only for you. Most fee-only planners charge by the hour. For these, get an estimate of how many hours for each part of the job. Some charge flat fees for each service they provide—for example, $1,000 for a comprehensive financial plan. And some charge an annual fee of one or two percent of the total financial assets managed. If you're thinking about hiring a planner who works for a percentage, keep in mind he or she might be less willing to suggest liquidating investments—even if it's in your best interest—because the fee will decline in the process. If you're just starting out, if your range of assets is small, or if you need advice about a specific topic, work with a fee-only planner who charges by the hour or by the project.
  • Are you a fiduciary? Planners who carry a fiduciary responsibility have a legal and ethical charge to act in their clients' best interests. On the other hand, planners who work using a "sustainability" standard merely have to make decisions that are "suitable" for you generally, but not necessarily in your best interest. Stay away from planners who aren't fiduciaries; all CFPs are.

Can You Do This Stuff Yourself?

If you have the time, you can definitely do your own financial planning; tons of resources are available to help. Sites like Mint.com can help you get organized to make budgets and calculate your net worth. Dozens of useful websites, newsletters, and columnists cover financial planning issues. But keep in mind that sites sponsored by big brokerage firms may offer advice promoting products they sell. Among independent advice-givers, Kiplinger.com is our favorite for all types of investment advice. FinancialEngines.com is a solid site for personalized retirement advice. The Social Security Administration offers retirement estimators/calculators that can help you decide when to start receiving its benefits. Resources like Savingforcollege.com, CollegeBoard.org, FinAid.org, and universities' tuition calculators can help you figure out how to afford tuition payments. But dependable automated online comprehensive financial planning doesn't yet exist (although several companies are working on it).

Despite all the financial planning knowledge you possess (or can acquire), keep in mind that no matter how good your original plan, you'll need to keep abreast of evolving investment strategies and changing laws and regulations.