Picking the right financial planner for you - includes profiles of planners LeCount Davis, Mabel T. Flowers and Charles Ross

Black Enterprise, April, 1993 by Steve Bergsman

The recessionary demons haunting today's economy may make the American dream seem more like a nightmare. As many families can attest, flat salaries and stingy interest rates are no match for spiraling costs of living. No wonder so many folks are finding it impossible to get their financial houses in order.

Just a generation ago, investment decisions seemed blissfully simple. The average person tucked dollars away in a savings account, and maybe one other safe vehicle such as a certificate of deposit [CD] or money market account. For some, stocks and bonds helped round out retirement nest eggs.

Now, however, consumers face an investment minefield, where a range of new products - from reverse mortgages to life insurance policiesthat pay "living" benefits - tempt those starved for cash. To confuse things even more, everyone from insurance agents to bank tellers seems to hawk financial products.

To cope, no doubt, manyfolks have at least considered hiring a personal financial planner - a pro who'll analyze your money mistakes and point you toward a more prosperous path. But before you jump into the rescuing arms of a planner, take a hard look at your situation. "Everybody needs financial planning," says Marv Tuttle, managing director of the Institute of Certified Financial Planners in Denver. "Whether they need a financial planner is another story."

Keep in mind that a personal financial adviser requires a substantial investment in both time and money. If all you need is a tuneup - say, some advice on selecting mutual funds or investing a $5,000 inhertance - your needs may be better met by another, more affordable professional.

But perhaps what you need is more complex - a blueprint, if you will, for college savings and estate planning. In that case, a financial planner may be for you. What do you stand to gain? A good financial planner should be able to dispense advice on a broad range of financial topics, including taxes, estates, retirement funds, insurance and investments. After a careful review of your circumstances, a planner will generally prepare a written plan that ties together allthe knots of your finances - past, present and future.

To decide whats best for your situation, consider the different types of planners and what they have to offer.

* Fee-only planners are compensated only for the advice they give, usually on an hourly basis. Though they do not sell investments, fee-only planners may recommend specific products, such as mutual funds or savings bonds, to help you achieve your financial goals. Even so, they won't see a penny in commissions. The fact that their recommendations aren't influenced by fat bonuses puts many clients at ease. But impartiality costs: Hourly rates for fee-only planners can run anywhere from $100 to $250 and up.

* Commission-only planners come in many guises. Some call themselves "investment consultants," while others say they're "financial counselors." These practitioners dispense advice free of charge, but there's a hitch: Their income relies on commissions from the products they sell, such as insurance and stocks. In the end, their services can be both costly and biased.

Consider, for instance, that commissions for most financial products range from 4% to 10% of the money invested. "A client should ask himself orherself whether the planner is recommending a product that is best for me or a product that has the highest commission payoff," says Ron Rogi, chairman of public relations for the National Association of Personal Financial Advisors in Buffalo Grove, III.

* Fee-and-commission planners charge a fee and accept commissions, too. They typically charge for an initial consultation and recommend specific products to suit your needs. Keep in mind, however, that most fee-and-commission planners earn fullythree quarters of their incomes from commissions.

* Other financial advisers may work for large corporations that offer financial counseling to their workers, free of charge. Check to see if your company offers any financial seminars (see sidebar, "Teaching Fiscal Awareness-). Another affordable afternative to formal planning is available from firms such as New York-based Pricewaterhouse. For a bargain $375, the accounting firm's retail outlets will prepare a customized financial sketch, figuring your networth and outlining specific strategies for saving, investing and reducing taxes.

Picking a personal financial planner requires both diligence and caution. Largely unregulated, the field attracts scores of people who masquerade as financial experts. Crack open your yellow Pages. Chances are, only a handful of those listed as financial planners are bona fide pros. Indeed, investment scams are so rampant that they bilk unsuspecting clients for about $10 million a year, says the Washington, D.C.-based Consumer Information Center.

Your best defense against ripoffs? Seek recommendations from your friends and family, as well as professional associates like your lawyer or accountant. Next, make sure that a planner holds the proper credentials.