Q&A: Planning Issues

Seriously, you need more than the little advice a newspaper columnist can give you. Don't be embarrassed about being clueless--few of us would know exactly how to handle that much moola, beyond having one heck of a binge at Nordstrom or Newport Beach Yacht Sales, or whatever your retail outlet of choice might be.

Even if you did think you knew what you were doing, I'm not so sure it would be a good idea to do it all on your own. Having a second set of eyes to look over your financial choices--someone who isn't intimidated by seven-figure checks--would be invaluable, and could prevent you from making some stupid mistakes. You are in a position to have an accountant, a lawyer and a planner--each of whom might be helpful in evaluating the others.

The good news is that there are lots of smart, skilled financial planners out there who are dying to help you.

You have the kind of money that attracts the best of the best--fee-only financial planners who make their bread and butter by managing big wads of cash. Poorer folks have to contend with commission-based salespeople trying to sell them annuities.

You get to have top-flight personalized advice, a tailor-made portfolio and goodies such as tax advice and estate planning from people who know what they're doing.

They won't come cheap. Expect to pay around 1% of your assets a year. That $45,000 may seem like a lot now, but trust me, you could blow a lot more than that with one bad investment call.

You'll want to interview several candidates before you decide to hire one. You can get a list of fee-only planners from the National Assn. of Personal Financial Advisors at http://wwwnapfa.org or by calling (888) FEE-ONLY. If you have rich friends, chat them up about who manages their money. Also check out the information The Times has about choosing financial planners, at http://www.latimes.com/finplan (it's free--you'll like that).

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Q. In choosing a financial planner, how much weight should I place on his or her membership in professional associations? I've discovered that a planner I had intended to go to is not a member of the National Assn. of Personal Financial Advisors, or a CPA-PFS. Would you advise looking elsewhere?

A. Oops, you're mixing associations and credentials.

NAPFA is a professional association for fee-only planners--those who do not take commissions for their recommendations and who are compensated solely by their clients. Its membership is quite small--only about 600 members--largely because most of the financial planning profession accepts commissions.

The PFS, or personal financial specialist, is a financial planning credential available only to certified public accountants who have met certain experience and knowledge requirements in financial planning. Although many CPA-PFS holders are fee-only, that is not a requirement of the designation.

It's easy to get confused with the alphabet soup out there in financial planning today. Every profession and group insists that it's the best or the only, but in fact there is no one golden standard.

The most common financial planning credential, and the first one I'd look for, is that of certified financial planner, or CFP. (In the interests of full disclosure: I completed the CFP training program two years ago.) The PFS is another good starter credential, as is the ChFC, which stands for chartered financial consultant.

Notice I said "first" and "starter." Anyone who has finished the course work would admit that the training helps you know more, but it also shows you how much more you need to know. What's even more important is what education and experience the planner has had since gaining the credential, what his or her ethical standards are and whether you and the planner are a good match.

Membership in certain professional organizations is a good sign, but, again, it can't be considered a guarantee of excellence. CFPs who are members of the Institute of Certified Financial Planners, a membership organization, are required to maintain certain ethics standards and to continue their educations. Active CPAs and ChFCs have membership organizations with ethics and ongoing education requirements as well. You can check out these organizations on their Web sites: http://www.icfp.org, http://www.cpapfs.org or http://www.financialpro.org/sfsp. You'll find NAPFA's standards at http://www.napfa.org.

You also can check out all the free information we have for you at http://www.latimes.com/finplan before you get started looking for a planner. I also recommend Charles A. Jaffe's book "The Right Way to Hire Financial Help." You're putting your financial future in someone else's hands, so it pays to do some homework.

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