the right stuff - how to select an financial advisor

Black Enterprise, May, 1999 by Lynette Khalfani

When it comes to selecting an advisor, you have several options. Here's how to make the best choice.

the right stuff

HAVE YOU EVER WONDERED WHAT'S THE BEST WAY TO DIG yourself out of debt, save your hard-earned money or invest for the future? If so, you may need the services of a financial planner. Contrary to popular opinion, financial planners aren't just for wealthy individuals. In fact, experts say that hiring a financial planner has less to do with what you have than with what you want to have.

"Anyone who has financial goals and objectives" but doesn't feel completely comfortable coming up with their own strategies "should hire an advisor," says Elissa Buie, president of the Denver-based Institute of Certified Financial Planners. And at certain critical junctures in life--such as when you're getting married Or starting a family, purchasing a new home or planning for retirement--solid financial advice becomes imperative.

BLACK ENTERPRISE has decided to revisit this subject because it's important to all aspects of your life. (See "Seeking An Investment Advisor," November 1998.) To make the process a little easier, here are some step-by-step guidelines that can help you find the planner who's right for you.

STEP ONE: GATHER NAMES

The very first thing to do is obtain a list of potential advisors. Contact professional associations whose members are financial planners. You can call the Institute of Certified Financial Planners (ICFP) at 800-282-PLAN or tap into their Website at www.icfp.org. The National Association of Personal Financial Advisors (NAPFA), located in Buffalo Grove, Illinois, can be reached at 888-FEE-ONLY or www. napfa.org. To contact the International Association for Financial Planning (IAFP), headquartered in Atlanta, call 800-945-4237 or log on to www.iafp.org. These organizations will provide you with the names of planners in your area. Individuals with CFP (Certified Financial Planner) after their names have received the highest designation in the profession.

In fact, the CFP designation is viewed as the benchmark in the financial planning industry for several reasons. First of all, the appointment was specifically designed by and for financial planners, and didn't grow out of any other profession, such as accounting, sales or insurance. Additionally, to receive the CFP designation, advisors have to jump through a number of hoops, all of which are designed to ensure a basic level of education, experience and professionalism. To become licensed, they must successfully complete a rigorous examination (which currently has only around a 50% pass rate); sign a code of ethics whereby they promise to abide by the highest standards of conduct; take continuing education classes; and have a minimum of three years' experience in the business.

Still, consumer rights groups warn that professional credentials alone aren't enough to guarantee that you receive sound financial counseling. Experts say that there are good and bad planners with the CFP title--and those without. Therefore, it's up to you to really do your homework.

In addition to securing names from professional organizations, get referrals from colleagues, friends or family members. A personal testimonial from a reliable source can help you during your search.

"If you're just getting started and you're a little nervous, word of mouth from someone you trust and respect is probably the best way to go," says Dwayne Grady, a financial planner with American Express Financial Advisory Services in Wilmington, Delaware.

Grady ought to know: most of his clients--from Washington, D.C., to New Jersey--have come from referrals.

One such client is Darren Comedy, an architect in the nation's capital, who says he's pleased he took the time to hire Grady as his personal financial planner. Darren and his wife, Caren, now have what he calls a "nice game plan" that guides them through everything from investing in stocks and bonds to maintaining the right kind of insurance policies.

STEP TWO: PRE-SCREEN PROSPECTIVE PLANNERS

Once you've come up with a list of potential financial planners, your next step is to contact them. Ultimately, your task is to weed out those individuals who, for one reason or another, might be unsuitable for you. Whittle down the field by assessing each individual's merits based on background and experience, products and services, and compensation.

Begin your inquiry by asking about the advisor's educational and professional history. Find out where he or she went to school, what degree(s) were earned and, of course, whether the person has any credentials recognized in the industry, such as the CFP or the Chartered Financial Consultant (ChFC) designation.

Find out how long the person has been a financial planner and for which firms he or she has worked. You can request references, although you should be aware that some advisors don't give out the names of their clients because of privacy concerns. Nonetheless, look for someone with a proven track record.